Commodity Futures Trading Commission

 

Whether you are a seasoned firm launching a new fund or an emerging private fund manager, this article summarizes fundamental steps for determining registration related requirements for the.

This page was last edited on 26 September , at The data contained in this website is not necessarily provided in real-time nor is it necessarily accurate.

Introduction to CFTC Regulation

Whether you are a seasoned firm launching a new fund or an emerging private fund manager, this article summarizes fundamental steps for determining registration related requirements for the.

They are delighted with peace of mind knowing they are protected through the regulation imposed by them. As well, investors can enjoy secure and transparent markets to trade in. As you know by now, the CFTC is not an easy regulatory authority to be licensed and regulated by.

The organization has created various strict requirements and guidelines brokerages must follow to offer investment services in America. For it is mandatory for all brokerages offering investment services in the commodities, futures, options and Forex trading to be licensed and regulated by the CFTC. So, for brokerages willing to accept the challenge and open accounts in the U.

Well, for one, all brokers are required to be competently registered with the CFTC. In order to do this, the CFTC carefully examines each and every brokerage who applies for licensing through them to determine if they meet all the strict requirements. As well, brokerages must display their registration number on their website. Once a brokerage meets the requirements and is fully licensed, they must comply with the supervision and oversee of the CFTC. This includes proper record keeping for financial reporting on a periodic basis.

The CFTC requires companies to submit financial audit reports to ensure they are following best financial practices and are not committing any crimes such as money laundering. Another requirement of CFTC regulation regarding Forex brokers is the significant amount of operating capital held by them. This amount is much higher than most other forex brokers in the world and goes to show just how strict and serious the CFTC is about large and competent Forex brokers.

The CFTC was put in place to protect consumers, and this high operating capital can protect investors from broker bankruptcy and offers better liquidity for them as well. Another guideline in place for the protection of consumers is the segregation of accounts between Forex brokers and investors.

A famous rule brokers must fall is the FIFO rule first in, first out. What this means, is that traders must liquidate the oldest multiple open positions on a single currency pair when the trades are being closed. All positions must be closed in the order that they were opened. Another restrictive requirement of CFTC regulated Forex brokers is the inability for traders to entertain the hedging method. All brokers must implement a no hedging rule on their platforms as hedging strategies are strictly forbidden under CFTC regulation.

This page may not include all available products, all companies or all services. Introduction to CFTC Regulation The United States of America takes the regulation of financial markets very seriously and has developed and implemented quite a few regulatory authorities over the years. CFTC Responsibilities As the CFTC is such an important and massive regulatory authority of so many financial instruments and markets, it is no surprise they have an overwhelming amount of responsibilities.

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Plus 45 User Reviews. AvaTrade 23 User Reviews. In , the Dodd—Frank Wall Street Reform and Consumer Protection Act , expanded the CFTC's authority into the swaps markets , to prohibit the reckless use of manipulative schemes without -as in the past- having to prove the specific intent of the accused to affect prices and the existence of an artificial price.

The CFTC assures utility of the futures markets by encouraging their competitiveness and efficiency, ensuring their integrity, protecting market participants against manipulation, abusive trading practices, and fraud, and ensuring the financial integrity of the clearing process. The CFTC like the SEC, does not directly regulate the safety and soundness of individual firms, with the exception of newly regulated swap dealers and major swap participants, for whom it sets capital standards pursuant to Dodd-Frank.

As of the CFTC oversees 'designated contract markets' DCMs or exchanges , swap execution facilities SEFs , derivatives clearing organizations , swap data repository , swap dealers, futures commission merchants , commodity pool operators and other intermediaries.

Two actions by the CFTC in led some market participants to express concerns that the CFTC might modify the "Swap Exemption" and attempt to impose new regulations on the swap market. In May the CFTC issued a 'concept release' requesting comment on whether regulation of OTC derivatives markets was appropriate and, if so, what form such regulation should take. Since the CFTC has given secret exemptions from hedging regulations to 19 major banks and market participants, allowing them to accumulate essentially unlimited positions.

A trader or bank granted an exemption as a bona-fide hedger can affect the price of a commodity without being either its producer or consumer. In December during the subprime mortgage crisis , the CFTC began investigating transportation, storage and trading of U. On June 25, Speaker Pelosi sent a letter to President Bush calling on him to direct the CFTC to use its emergency powers to take immediate action to curb excessive speculation in energy markets, to investigate all energy contracts and that despite growing reports of excessive speculation in energy markets, the CFTC refused to take actions they have taken in the past.

In a campaign speech August presidential candidate Barack Obama argued that loopholes in CFTC regulations contributed to skyrocketing prices and lack of transparency on oil markets. In April Reuters reported that of the "40 major figures in the oil industry, including traders and analysts at some of the largest banks, trading houses and oil companies" interviewed, the vast majority 73 percent thought increased speculation boosted prices beyond what supply and demand fundamentals dictated. Mark Wetjen wrote in an OpEd by the WSJ afterwards that ["bitcoin] could play a fascinating role in the derivatives markets as well as financial services.

Based in Washington, D. The Commission consists of five Commissioners appointed by the President of the United States to serve staggered five-year terms. The President, with the consent of the United States Senate , designates one of the Commissioners to serve as Chairman. No more than three Commissioners at any one time may be from the same political party. The Chairman's staff has responsibility for providing information about the Commission, interacting with other entities and for the preparation and dissemination of Commission documents.

The Chairman's staff includes the Office of the Inspector General , which conducts audits of CFTC programs and operations, and the Office of International Affairs, the focal point for the Commission's global regulatory coordination efforts. The Office of External Affairs OEA is the Commission's liaison with news media, producer and market user groups, educational groups, and the general public. OEA provides information about the regulatory mandate, the economic role of the futures markets, new market instruments, market regulation, enforcement actions, and customer protection initiatives.

The Division of Swap Dealer and Intermediary Oversight oversees the registration, compliance, and business conduct standards of intermediaries, swap dealers and major swap participants. The functions of the Division of Clearing and Intermediary Oversight include oversight of derivatives clearing organizations.

The Division of Market Oversight has regulatory responsibility for initial recognition and continuing oversight of trade execution facilities, including new registered futures exchanges and derivatives transaction execution facilities.

The regulatory functions of the Division include, among other things, market surveillance , trade practice reviews and investigations, rule enforcement reviews, review of product-related and market-related rule amendments, and associated product and market-related studies. Director as of is Vincent A. Violations may involve commodity futures or option trading on domestic commodity exchanges, or the improper marketing of commodity investments.

The Division may, at the direction of the Commission, file complaints before the agency's administrative law judges or in the U. Alleged criminal violations of the Commodity Exchange Act or violations of other Federal laws which involve commodity futures trading may be referred to the Justice Department for prosecution. The Division also provides expert help and technical assistance with case development and trials to U. Attorneys' Offices, other Federal and state regulators, and international authorities.

Lowe, [36] and is Aitan Goelman. The Office of the Chief Economist is an independent office with responsibility for providing expert economic advice to the Commission. Its functions include policy analysis, economic research, expert testimony, education, and training.

As of the office is held by Sayee Srinivasan. OGC staff represents the Commission in appellate litigation and certain trial-level cases, including bankruptcy proceedings which involve futures industry professionals. As the Commission's legal advisor, OGC reviews all substantive regulatory, legislative, and administrative matters presented to it and advises the Commission on the application and interpretation of the Commodity Exchange Act and other administrative statutes.

OGC also assists the Commission in performing its adjudicatory functions. Head as of April is Jonathan L. The Office of the Executive Director OED formulates and implements the management and administrative policies and functions of the agency. OED staff formulate the agency's budget, supervise the allocation and use of agency resources, promote management controls and financial integrity, and develop and maintain the agency's automated information systems.

The Office of Proceedings, which is under the administrative direction of OED, provides an inexpensive and expeditious forum for handling customer complaints against people or firms registered with the National Futures Association NFA through its reparations program.

The Office of Proceedings also hears and decides enforcement cases brought by the Commission. It is responsible for recording and monitoring the trading of futures contracts on United States futures exchanges.

The CFTC has the authority to fine, suspend, or sue the company or individual in a federal court in cases of misconduct, fraud , or if a rule breaking occurs. The CFTC publishes weekly reports containing details of holdings for market-segments, which have 20 or more reportable participants. The reports are released every Friday including data from the previous Tuesday and contain data on open interest split by reportable and non-reportable open interest as well as commercial and non-commercial open interest.

The CFTC is authorized to regulate commodity pools and commodity trading advisors. Many hedge funds operate as commodity pools.

In an address to the Securities Industry Association in , Sharon Brown-Hruska, acting director of the CFTC, said that 65 of the top hedge funds in were commodity pools, and 50 out of the largest hedge funds were CTAs in addition to being commodity pools.