CFTC – The Commodity Futures and Trading Commission

June 29, 2015 by in category Articles tagged as , , with 0 and 0
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The US Commodity Futures and Trading Commission (CFTC) is an agency independent of the US government that was created in 1974 and responsible in regulation of the futures and options markets.

The CFTC has their offices in Chicago, New York and Kansas City, Missouri. The commission is made up of 5 commissioners who are appointed by the president and serve for a 5 year term. With the coordination and consent of the US Senate, the president appoints one of the commissioners to serve in the capacity of the Chairperson. It is a rule that no more than 3 commissioners in the CFTC should be from one party.


CFTC Mission

The CFTC is on a mission to foster transparent, financially fit and competitive markets to keep off system risk and make sure that the market users are protected, as well as, their funds. The protection they get is against manipulation, fraud and practices that are abusive and those that might be associated with derivatives and products in the Commodity Exchange Act.

To make sure that all objectives to their mission are met, the commission regulates the derivatives markets from abuse and activities to safeguard the customers’ funds. The agency in its capacity looks to reduce risks of the swaps and futures markets to the public and the economy.

Over the time the CFTC has been in authority, markets that were under the commission’s regulation have faced huge growth to have contracts on commodities like metal and energy; some of these commodities are crude oil, gasoline, gold, silver and copper. They have also done agreements on financial items like stocks indexes, foreign currency and interest rates.

One of the major tasks that the CFTC has been charged with was the reformation of the market after the 2008 financial crisis which was to some extent caused by the unmanned swaps market. From this time, the CFTC is responsible in the regulation of the $400 trillion swaps market is believed to be about 12 times the futures market.

The swaps and futures markets are of essence to an economy with regard to the way businesses and investors have their risks managed. Almost all elements of the economy such as the commercial companies, pension funds, ranchers, producers and municipalities make use of these markets in locking the price or a rate as they focus on what they are best at. This might be innovation, offering of services or production of goods.

Responsibilities of the CFTC

The duty of the CFTC is to make sure that utility is met in the futures markets through encouragement of their competitiveness and efficiency. They are to ensure integrity, protect the market participants from manipulation, as well as, from abusive trade practices, fraud and make sure that the financial integrity of the clearing procedure is maintained. Like the SEC, the CFTC does not regulate the safety and soundness of the individual firm directly. The CFTC makes it possible for the futures markets to deliver the function of price discovery and price risk offsetting.

From 2014, the CFTC subdues the designated contract markets’ Swap Execution Facilities, exchanges, swap data repository, clearing firms, future commission merchants, and swap dealers among other intermediaries. To fully meet its mission and objectives, the CFTC coordinates with foreign regulators like the Financial Conduct Authority which oversees the London Metal Exchange.

Visit CFTC official website
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