Commodity Futures Trading Commission (CFTC) is an independent agency created by Congress in 1974. The purpose of the CFTC is to regulate trading of futures contract and option markets in the United States. In December 2000, Congress expanded the Commission’s mandate and gave the Commission more comprehensive power by passing the Commodity Futures Modernization Act of 2000.
In 1974, a major part of futures trading happened in the agricultural sector. Today the CFTC regulates a vast array of highly complex financial futures contracts. The mission of the CFTC is an open, competitive, and financially sound futures and option markets. The CFTC assures economic utility by the following methods:
- encouraging competitiveness and efficiency in the futures market;
- protecting market participants against manipulation, fraud and abusive trading practices;
- monitoring markets and market participants closely;
- ensuring the financial integrity of the clearing process; and
- Enabling the futures market for price discovery and offsetting price risk.
The CFTC investigates and if necessary, brings action against firms and individuals who are suspected of fraud in selling commodity futures and options. Title 17 Chapter 1 of the Code of Federal Regulations (CFR) provides for the CFTC’s regulations.
The CFTC has five commissioners who are appointed by the President with the consent of the Senate. The Commissioner’s term of office is five years. One of the Commissioners is appointed as the Chairman by the President and not more than three commissioners may be from the same political party at any one time. The Office of the General Counsel represents the CFTC in appellate litigation and some trial cases, and is the legal advisor of the CFTC.
The Advisory committees of the CFTC include the Agricultural Advisory Committee, the Global Markets Advisory Committee, Energy and Environmental Markets Advisory Committee, and the Technology Advisory Committee. The CFTC headquarters is based in Washington, DC and it has other offices at Chicago, Kansas, New York and places where futures exchanges are located.