This article reveals what is Commodity Futures Trading Commission (CFTC) and how this market supervising and regulating institution influence the futures, options and forex markets and which useful services it provides for market participants or simply for us.

Commodity Futures Trading Commission (CFTC) regulation

The history of Commodity Futures Trading Commission (CFTC) starts in 1974 when The US Congress found it as an institution for exchange traded futures and options market oversight and regulation.

When the CFTC was found derivatives markets were represented mostly by agriculture futures but during several decades derivative markets developed and nowadays we can see Eurodollar futures, bond futures, S&P500 futures and etc. In addition, financial futures, options on futures and futures on swaps were introduced.

Nowadays, the CFTC’s mission is to protect market users and the public from fraud, manipulation, abusive practices and systemic risk related to derivatives that are subject to the Commodity Exchange Act, and to foster open, competitive, and financially sound markets. It allows market participants to use derivative markets for risk management (hedging) and works on market participant confidence in US market increase.

Commodity Futures Trading Commission (CFTC) organization

Five commissioners are recommended by the Senate and approved by the President for 5 year term. One of the five commissioners is chosen by the president as a chairman. Not more than three of five commissioners can be from one party: it means that there is always either two democrats and three republicans or two republicans and three democrats.

Commodity Futures Trading Commission (CFTC) got the mandate up to year 2013, after the Congress will valuate CFTC work and prolong or cancel the mandate. I am sure they will prolong.

Commodity Futures Trading Commission (CFTC) futures, options and forex rules

A lot of markets are supervised by the CFTC: from name it is clearly seen that US exchange traded futures markets are under the supervision of Commission. As well as, all US exchange traded options markets are supervised by CFTC. And since 13th of January 2009 FOREX is the market which is being regulated by the CFTC.

CFTC got the right to supervise and regulate FOREX by Food, Conservation, and Energy Act. There is also a Dodd Frank Act which gives the rights for CFTC to regulate OTC market, however it must be reviewed in a separate article.

market oversight and regulation means that not only the market itself is supervised but all its parts or market participants: exchanges, clearing organizations, brokerage and dealing companies, commodity trading advisors (CTAs), commodity pool operators (CPOs), futures commodity merchants (which can be called as primary brokers) and etc.

All markets’ (except FOREX) which are supervised by CFTC daily volume is more than 1.5 trillion USD.

Commodity Futures Trading Commission market oversight: cot reports

In order to supervise the market CFTC collect a lot of information from various sources which can be classified in this way:

• Market participant reports (including COT reports)
• National Futures Association (NFA) data
• US Exchanges

CFTC reports

What is not supervised by CFTC?

Stock and bond markets are not supervised by the CFTC. Securities and Exchange Commission is responsible for these markets. As well as, CFTC do not supervise insurance, real estate, banks and other companies (if only they are not previously mentioned market participants).

Why it is important to be in touch with what CFTC do?

1. If you are a market participant of forex, futures or options markets you potentially (depending on your work and funds) is under their supervision.
2. Your brokerage and dealing companies are under the supervision of this organization.
3. If you use COT reports you have to know about changes connected with these reports.
4. And it is often useful to know about some illegal actions of other market participants (for example, brokerage companies or fund managers).