Commodity Futures Trading Commission

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Commodity Futures Trading Commission

The Commodity Futures Trading Commission (CFTC), the federal regulatory agency for futures trading, was established by the Commodity Futures Trading Commission Act of 1974 (88 Stat. 1389; 7 U.S.C.A. 4a), approved October 23, 1974. The commission began operation in April 1975 and its authority to regulate futures trading was renewed by Congress in 1978. Its authority was again renewed with the Commodity Futures Modernization Act of 2000, which also mandated major reforms of the commission. The CFTC maintains a comprehensive web site at <http://www.cftc.gov>.

The CFTC consists of five commissioners who are appointed by the president with the advice and consent of the Senate. The commissioners serve staggered five-year terms and by law no more than three commissioners can belong to the same political party. One commissioner is designated by the president to serve as chairperson. The chair's staff includes the Office of the Inspector General and the Office of International Affairs.

To comply with the requirements of the Modernization Act, the commission underwent a restructuring in 2002. As a result, it consists of six major operating units: the Division of Clearing and Intermediary Oversight, the Division of Market Oversight, the Division of Enforcement, the Office of the Chief Economist, the Office of the General Counsel, and the Office of the Executive Director.

The CFTC regulates trading on the 11 U.S. futures exchanges, which offer numerous kinds of futures contracts. It also regulates the activities of some three thousand commodity exchange members, 360 public brokerage houses (futures commission merchants), about 38,000 commission-registered futures industry salespeople and associated persons, and 2,500 commodity trading advisers and commodity pool operators. Some off-exchange transactions involving instruments similar in nature to futures contracts also fall under CFTC jurisdiction.

The commission's regulatory and enforcement efforts are designed to ensure that the futures trading process is fair and that it protects both the rights of customers and the financial integrity of the marketplace. The CFTC approves the rules under which an exchange proposes to operate and monitors exchange enforcement of those rules. It reviews the terms of proposed futures contracts and registers companies and individuals who handle customer funds or give trading advice. The commission also protects the public by enforcing rules that require that customer funds be kept in bank accounts separate from accounts maintained by firms for their own use, and that such customer accounts be marked to present market value at the close of trading each day.

Futures contracts for agricultural commodities were traded in the United States for more than one hundred years before futures trading was diversified to include trading in contracts for precious metals, raw materials, foreign currencies, commercial interest rates, and U.S. government and mortgage Securities. Contract diversification has grown in exchange trading volume, a growth not limited to the newer commodities.

The CFTC maintains large regional offices in Chicago and New York, cities in which eight of the nation's 11 futures exchanges are located. Smaller regional offices are located in Kansas City and San Francisco, and there is a suboffice of the Chicago regional office in Minneapolis.

Further readings

Commodity Futures Trading Commision. 2002 Annual Report. Available online at <www.cftc.gov/files/anr/anr2002.pdf> (accessed June 1, 2003).

References in periodicals archive ?
This case goes to the core of the CFTC's mission: protecting market participants and the public from manipulation and abusive practices that undermine the integrity of the (futures) markets," CFTC Enforcement Director Aitan Goelman said in a statement.
Under Gensler, the CFTC wrote new rules to bring derivatives under government supervision for the first time.
At its core, the Shad-Johnson Accord provided for CFTC regulation of futures (including on government securities and broad-based stock indexes), options on futures and commodities and SEC regulation of securities-based options.
The Commodity Futures Trading Commission Acting Chairman Mark Wetjen and Office of Financial Research Director Richard Berner today announced a Memorandum of Understanding on the terms and conditions for the CFTC and OFR to begin a joint project to enhance the quality, types and formats of data collected from registered swap data repositories.
As reported by Reuters, the new bill will give the CFTC oversight of the $615 trillion over-the-counter derivatives market blamed in part for accelerating the recent financial crisis when taxpayers had to bail out some players who took risks they couldn't afford.
I have no doubt that the credit extention and internal leverage of firms are at all-time highs," says James Stone, the chairman of the CFTC under President Carter.
The new service offerings will help investment companies registered under the Investment Company Act of 1940 (1940 Act) and private investment vehicles comply with new CFTC rules impacting funds that invest in certain derivative instruments.
Radhakrishnan served over 12 years in several senior positions at the CFTC.
All trading of USD/Bitcoin swaps on TeraExchange, a regulated swap execution facility, are now subject to the rules and regulations of TeraExchange and the CFTC.
The CFTC deal differs from the previous agreement because JPMorgan is formally acknowledging that its traders recklessly distorted prices to reduce the banks' losses at the expense of other market participants.
Meister led the regulator's division of enforcement in bringing record numbers of enforcement actions covering the full range of the regulator's authority, according to the CFTC.
He advises clients with respect to all aspects of compliance with the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) and CFTC regulations.