The Commodity Futures Trading Commission (CFTC) is an independent agency of the United States Government.
The Commodity Exchange Act (CEA), et seq., prohibits fraudulent conduct in the trading of futures contracts. In 1974, Congress amended the Act to create a more comprehensive regulatory framework for the trading of futures contracts and created the Commodity Futures Trading Commission, replacing the Commodity Exchange Authority. The stated mission of the CFTC is to protect market users and the public from fraud, manipulation, and abusive practices related to the sale of commodity and financial futures and options, and to foster open, competitive, and financially sound futures and option markets.
Futures contracts for agricultural commodities have been traded in the U.S. for more than 150 years and have been under Federal regulation since the 1920s. In recent years, trading in futures contracts has expanded rapidly beyond traditional physical and agricultural commodities into a vast array of financial instruments, including foreign currencies, U.S. and foreign government securities, and U.S. and foreign stock indices.
Congress created the CFTC in 1974 as an independent agency with the mandate to regulate commodity futures and option markets in the United States. The agency's mandate has been renewed and expanded several times since then, most recently in December 2000 when Congress passed the Commodity Futures Modernization Act of 2000, which instructed the Securities & Exchange Commission and the CFTC to develop a joint regulatory regime for single-stock futures, and the products subsequently began trading in November 2002. Today, the CFTC assures the economic 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. Through effective oversight, the CFTC enables the futures markets to serve the important function of providing a means for price discovery and offsetting price risk.
The Chairman's staff has direct responsibility for providing information about the Commission to the public and interacting with other governmental agencies and the Congress, and for the preparation and dissemination of Commission documents. The Chairman's staff also ensures that the Commission is responsive to requests filed under the Freedom of Information Act. 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, which is the focal point for the Commission's global regulatory coordination efforts.
The Chairman's staff is also responsible for liaison with the public, the Congress, and the media. The Office of External Affairs (OEA) is the Commission's liaison with the domestic and foreign news media, producer and market user groups, educational and academic groups and institutions, and the general public. OEA provides timely and relevant information about the Commission's regulatory mandate, the economic role of the futures markets, new market instruments, market regulation, enforcement actions, and customer protection initiatives, actions, and issues. OEA also provides assistance to members of the media and the general public accessing the CFTC's Internet website.
The CFTC monitors markets and market participants closely by maintaining, in addition to its headquarters office in Washington, offices in cities that have futures exchanges—New York, Chicago and Kansas City.
On July 25, 2007 the Division of Enforcement filed a civil complaint in Federal District Court in New York City alleging various illegal practices connected with natural gas futures trading and the collapse of hedge fund Amaranth Advisors.
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 rulebreaking 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. This type of report is referred to as 'Commitments-Of-Traders'-Report, COT-Report or simply COTR.
The CFTC is to regulate commodity pools and commodity trading advisors. Many hedge funds operate as commodity pools. In an address to the Securities Industry Association in 2004, Sharon Brown-Hruska, acting director of the CFTC, said that 65 of the top 100 hedge funds in 2003 were commodity pools, and 50 out of the 100 largest hedge funds were CTAs in addition to being commodity pools.
On June 25, 2008 Speaker Pelosi sent a letter to President Bush calling on him to direct the Commodity Futures Trading Commission (CFTC) to use its emergency powers to take immediate action to curb excessive speculation in energy markets. They must act to investigate all energy contracts. Despite growing reports of excessive speculation in energy markets, the CFTC has refused to take actions they have taken in the past.
On June 26, 2008 the House passed the Energy Markets Emergency Act of 2008, H.R. 6377. The bill would take crucial steps to curb excessive speculation in the energy futures markets by directing the CFTC to: