The Commodity Futures Trading Commission (CFTC) is an independent government agency tasked with regulating commodity futures and option markets in the United States. The CFTC was created in 1974, by an amendment made to the Commodity Exchange Act.
The CFTC’s mission is to protect market users and the public from fraud, manipulation, abusive practices and systemic risk related to derivatives that are subject to the Commodity Exchange Act, and to foster open, competitive, and financially sound markets.
The CFTC and the “Commodity Futures Modernization Act”
In 2000, the Commodity Futures Modernization Act (CFMA) deregulated Over-the-Counter derivatives. These are the products that would eventually be core to the 2008 crash.
The CFTC clarified the law so that most over-the-counter (OTC) derivatives transactions between “sophisticated parties” would not be regulated as “futures” under the Commodity Exchange Act of 1936 (CEA) or as “securities” under the federal securities laws. Instead, the major dealers of those products (banks and securities firms) would continue to have their dealings in OTC derivatives supervised by their federal regulators under general “safety and soundness” standards.
The Commodity Futures Trading Commission had opposed deregulation, requesting instead that there be “functional regulation” of this Over-the-Counter derivatives market. Their request was denied by lawmakers with the passage of the CFMA.
The CFTC and the Volcker Rule
The CFTC has released their own version of the Volcker Rule, that is nearly-identical to the initial rule that the SEC, Fed, OCC and FDIC jointly prepared. You can find the CFTC’s version of the rule at: http://www.cftc.gov/ucm/groups/public/@lrfederalregister/documents/file/2012-935a.pdf. The deadline for public comment on the CFTC rule is April 16th, 2012.
Notable CFTC Employees
The current chairman of the CFTC is Gary Gensler.