Commodity Futures Trading Commission (CFTC) is a US-based agency responsible for regulating the derivatives markets, which includes options, swaps, and futures contracts.
CFTC plays an important role in regulating financial markets.
Without such regulation and regulators, market participants could be subjected to fraud by unscrupulous individuals and, in turn, lose faith in our capital markets.
This could make capital markets ineffective at efficiently allocating financial resources to the most deserving means of production and productive economic activities to the detriment of investors, consumers, and society.
It was founded in 1974 as an independent organization that took the responsibilities of its preceding regulatory agency named Commodity Exchange Authority (CEA).
In the past, futures contracts were commonly traded in the context of agricultural commodities. That is one of the reasons the CEA was part of the United States Department of Agriculture (USDA). However, the futures industry became increasingly complex and now presents a wide variety of contracts.
The CFTC’s mission statement:
The mission of the Commodity Futures Trading Commission is to promote the integrity, resilience, and vibrancy of the U.S. derivatives markets through sound regulation.
The CFTC’s vision statement:
To be the global standard for sound derivatives regulation.
Although focused on different industry sectors, the CFTC shares common goals with the Securities Exchange Commission (SEC).
Both agencies are working to prevent market manipulation and fraudulent activities, including Ponzi and pyramid schemes.
As part of their strategy, the so-called whistleblower programs reward citizens that provide valuable information about fraudulent activities.
After the Great Financial Crisis (“GFC”) of 2008, then-President Barack Obama approved the Dodd-Frank Wall Street Reform and Consumer Protection Act, which granted the CFTC and SEC increased authority, especially over large derivatives traders.
The CFTC organization consists o:
- The Commissioners
- The offices of the Chairman
- The agency’s operating units
The Commission consists of five commissioners appointed by the President, with the advice and consent of the Senate, to serve staggered five-year terms.
The President, with the consent of the 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.
Clearing and Risk (DCR)
The Division of Clearing and Risk (DCR) oversees derivatives clearing organizations (DCOs) and other market participants in the clearing process.
The Division of Enforcement investigates and prosecutes alleged violations of the Commodity Exchange Act and Commission regulations. Potential violations include fraud, manipulation, and other abuses concerning commodity derivatives and swaps that threaten market integrity, market participants, and the general public.
Market Oversight (DMO)
The Division of Market Oversight (DMO) fosters open, transparent, fair, competitive, and secure markets through oversight of derivatives platforms and swap data repositories.
Swap Dealer and Intermediary Oversight (DSIO)
The Division of Swap Dealer and Intermediary Oversight (DSIO) primarily oversees derivatives market intermediaries, including commodity pool operators, commodity trading advisors, futures commission merchants, introducing brokers, major swap participants, retail foreign exchange dealers, and swap dealers, as well as designated self-regulatory organizations.
Office of the Chief Economist (OCE)
The Office of the Chief Economist provides economic support and advice to the Commission, conducts research on policy issues facing the Commission, and educates and trains Commission staff.
The OCE plays an integral role in the implementation of new financial market regulations by providing economic expertise and cost-benefit considerations underlying those regulations.
Office of Data and Technology (ODT)
The Office of Data and Technology provides technology and data management support for market and financial oversight, surveillance, enforcement, legal support, and public transparency activities. ODT also provides general network, communication, storage, computing, and information management infrastructure and services.
Office of the Executive Director (OED)
The Executive Director ensures the Commission’s adaptation to the ever-changing markets it is charged with regulating, directs the allocation of CFTC resources, develops and implements management and administrative policy, and ensures program performance is measured and tracked Commission-wide.
Office of the General Counsel (OGC)
The Office of General Counsel provides legal services and support to the Commission and all of its programs.
These services include: representing the Commission in appellate, bankruptcy and other litigation; assisting in the performance of adjudicatory functions; providing legal advice and support for Commission programs; drafting and assisting in the preparation of Commission regulations; interpreting the CEA; and advising on legislative, regulatory, and operational issues.
Office of the Inspector General (OIG)
The Office of the Inspector General is an independent organizational unit at the CFTC. Its mission is to detect waste, fraud, and abuse and to promote integrity, economy, efficiency, and effectiveness in the CFTC’s programs and operations.
As such it has the ability to review all of the Commission’s programs, activities, and records. In accordance with the Inspector General Act of 1978, the OIG issues semiannual reports detailing its activities, findings, and recommendations.
Office of International Affairs (OIA)
The Office of International Affairs advises the Commission regarding international regulatory initiatives; provides guidance regarding international issues raised in Commission matters; represents the Commission in international fora such as the International Organization of Securities Commissions (IOSCO), OTC Derivatives Working Group (ODWG), and OTC Derivatives Regulators Group (ODRG); coordinates Commission policy as it relates to policies and initiatives of major foreign jurisdictions, the G20, Financial Stability Board (FSB), and U.S. Treasury Department; negotiates cooperative arrangements and responds to inquires related to supervisory cooperation or information sharing; and provides technical assistance to foreign market authorities, including advice, training, and an annual meeting and symposium.
Office of Legislative and Intergovernmental Affairs (OLIA)
The Office of Legislative and Intergovernmental Affairs (OLIA) is the chief advisor to the CFTC Chairman on matters before the U.S. Congress and serves as the Commission’s official liaison with Members of Congress, federal agencies, and the Administration.
Office of Minority and Women Inclusion (OMWI)
The Office of Minority and Women Inclusion leads the CFTC’s civil rights, equal employment opportunity, diversity, and inclusion programs.
Office of Public Affairs (OPA)
The Office of Public Affairs is the Commission’s primary public-facing office that provides honest, timely, and useful information across all communication platforms in order to serve internal and external stakeholders in all sectors to accomplish and facilitate the Commission’s mission. OPA proactively conducts outreach and creates messages designed to raise awareness of the CFTC brand in order to promote public trust.
Whistleblower Office (WBO)
The CFTC’s Whistleblower Program provides monetary incentives to individuals who report possible violations of the Commodity Exchange Act that lead to successful enforcement action, as well as, privacy, confidentiality, and anti-retaliation protections for whistleblowers who share information with or assist the CFTC.
The CFTC’s Advisory Committees were created to provide input and make recommendations to the Commission on a variety of regulatory and market issues that affect the integrity and competitiveness of U.S. markets.
The committees facilitate communication between the Commission and U.S. futures markets, trading firms, market participants, and end-users.
The committees currently include:
- Agricultural Advisory Committee
- Energy and Environmental Markets Advisory Committee
- Global Markets Advisory Committee
- Market Risk Advisory Committee
- Technology Advisory Committee
- CFTC-SEC Joint Advisory Committee