Commodity Futures Trading Commission (CFTC)

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Community Submission - Author: Caner Taçoğlu

Commodity Futures Trading Commission (CFTC) is a US-based agency responsible for regulating the derivatives markets, which includes options, swaps, and futures contracts. It was founded in 1974 as an independent organization that took the responsibilities of its preceding regulatory agency named Commodity Exchange Authority (CEA). 

In the past, futures contracts were commonly traded in the context of agricultural commodities. That is one of the reasons the CEA was part of the United States Department of Agriculture (USDA). However, the futures industry became increasingly complex and now presents a wide variety of contracts. 

The stated missions and responsibilities of the CFTC is to ensure that the US derivatives markets are operating efficiently:

“The mission of the Commodity Futures Trading Commission (CFTC) is to foster open, transparent, competitive, and financially sound markets. By working to avoid systemic risk, the Commission aims to protect market users and their funds, consumers, and the public from fraud, manipulation, and abusive practices related to derivatives and other products that are subject to the Commodity Exchange Act (CEA)

Although focused on different industry sectors, the CFTC shares common goals with the Securities Exchange Commission (SEC). Both agencies are working to prevent market manipulation and fraudulent activities, including Ponzi and pyramid schemes. As part of their strategy, the so-called whistleblower programs reward citizens that provide valuable information about fraudulent activities. The CFTC Whistleblower program awarded over $85 million since 2014.

After the financial crisis of 2008, Barack Obama approved the Dodd-Frank Wall Street Reform and Consumer Protection Act, which granted the CFTC and SEC increased authority, especially over large derivatives traders.

Currently, the CFTC counts with eight major operating units:

  • Division of Swap Dealer and Intermediary Oversight
  • Division of Clearing and Risk 
  • Division of Market Oversight 
  • Division of Enforcement
  • Office of Chief Economist
  • Office of the General Counsel
  • Office of the Executive Director
  • Office of the Whistleblower
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