US Commodity Futures Trading Commission

What does CFTC stand for?

CFTC stands for “Commodity Futures Trading Commission”. The institution’s core values are also represented with this abbreviation: “Commitment”, “Forward-thinking”, “Teamwork” and “Clarity”.

What is CFTC?

CFTC is an independent federal agency in the United States of America. Its history can be traced back to the early attempts of the US to regulate futures trading. Although there were previous efforts to monitor the stock exchange in the US during the 1800s, the government was only able to begin monitoring exchange in the 1920s. Later, the government began to engage directly with the traders with the 1996 Commodity Exchange Act that established the CEA (Commodity Exchange Authority) affiliated with the US Department of Agriculture. CEA began to monitor and investigate trading activities; and prosecute price manipulation as a crime. However, CEA was inadequate to handle the rapid growth of the futures market following the 1960s. Consequently, CFTC was established to enable extensive government regulation in trading with the “Commodity Futures Trading Commission Act” of 1974. Unlike the CEA, CFTC gained many regulatory powers over all futures trading and related exchange activities throughout the states. In 1982, “Futures Trading Act” further defined the jurisdictions of CFTC while legalizing options trading in agricultural commodities.

What Does the CFTC Do?

In line with its establishment history, the CFTC oversees transactions in the futures and options markets, manages market risks, and ensures trust among participants. It aims to ensure efficient functioning of financial markets, to protect investors by preventing illegal activities such as manipulation, abuse, and fraud, and to provide a fair competition environment for market participants. These markets include physical commodities such as agricultural products, energy, metals, and financial derivatives. In addition, the CFTC aims to support financial stability by increasing the transparency of the markets.

What is the Difference Between SEC and CFTC?

SEC stands for the “Securities and Exchange Commission”. SEC and CFTC are two separate federal agencies responsible for regulating financial markets in the United States. Their jurisdictions were clearly separated in the 1982 Futures Trading Act. SEC focuses more on capital markets, while CFTC focuses on commodity and derivative markets. In other words, the SEC regulates markets related to stocks, bonds, mutual funds and other securities, while the CFTC oversees commodity futures, options and other derivative products. Although the duties and powers of the two institutions are different, they can cooperate in some cases.

How is the CFTC Organization Structured?

The US President appoints commissioners for the CFTC administration and selects one of them as the chairman of the board with Senate’s approval. The organizational structure of the CFTC, located in Washington, D.C., includes the offices of the chairman and commissioners, as well as the agency’s 14 operating divisions and offices:
• Clearing and Risk (DCR), Enforcement (DOE), Market Oversight (DMO), Market Participants Division (MPD, formerly the Swap Dealer and Intermediary Oversight division), Division of Data (DOD), and Division of Administration (DA)
 • Office of the Chief Economist (OCE), Office of the General Counsel (OGC), Office of International Affairs (OIA), Office of Public Affairs (OPA), Office of Legislative and Intergovernmental Affairs (OLIA), Office of Minority and Women Inclusion (OMWI), Office of Technology Innovation (OTI), Office of Customer Education and Outreach (OCEO)

What is the CFTC Division of Clearing and Risk?

The Division of Clearing and Risk (DCR) supervises market participants in the clearing process including Derivatives Clearing Organizations (DCOs). The supervision covers the futures brokers, swap dealers, large swap participants and large traders. DCR operates to ensure that clearing transactions in the derivatives markets are carried out safely, efficiently and transparently. That’s why, it oversees the operation of clearing houses and helps them manage market risks.