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Governing the Futures Markets

Governing the Futures Markets. Kyle Draeger. Overview. Brief history of the regulations governing the futures markets (U.S.A.) Description of roles and responsibilities of: Commodity Futures Trading Commission (CFTC) National Futures Association (NFA) Self-Regulatory Organizations (SRO’s).

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Governing the Futures Markets

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  1. Governing the Futures Markets Kyle Draeger

  2. Overview • Brief history of the regulations governing the futures markets (U.S.A.) • Description of roles and responsibilities of: • Commodity Futures Trading Commission (CFTC) • National Futures Association (NFA) • Self-Regulatory Organizations (SRO’s)

  3. Federal Legislation • Anti-Gold Futures Act of 1864 • Banned the trading of gold futures to stop the paper money from trading at a discount to gold • Grain Futures Act of 1922 • Created the Grain Futures Commission that reported futures trading on grain and investigated misleading information that impacted the price of grain • Commodity Exchange Act of 1936 • Specified a variety of items as commodities and enacted rules to stabilize the pricing of commodities futures contracts

  4. Federal Legislation • Commodity Futures Trading Commission Act of 1974 • Formation of the Commodity Futures Trading Commission to regulate commodity futures and options markets within the US • Expanded the definition of commodity and futures contracts • Allowed for the trading of futures on underlying assets such as financial instruments

  5. Federal Legislation • Commodity Futures Modernization Act of 2000 • Renewed the CFTC’s Federal mandate • Lifted ban on single stock & narrow based stock index futures (regulation by both SEC and CFTC) • Modified the regulations to encourage innovation and competition and enacted new regulatory methods Result of the 1990’s collapse of organizations that managed futures funds

  6. Regulates the actions of futures commission merchants, salespeople, floor traders and brokers, commodity pool operators, commodity trading advisors and introducing brokers • Senate Agriculture Committee provides oversight

  7. Ensures that business intermediaries in the futures market are financially sound and registered • Investigate, Enforce and Prosecute suspicious activities in the futures markets (macro-level) • Oversees the National Futures Association

  8. Self-Regulatory Organizations • The Commodity Exchange Act empowers futures exchanges to self-regulate • Each exchange has a board that establishes and enforces rules (COI) • Disciplinary board to enact sanctions on members that break the rules • Report to CFTC

  9. National Futures Association • CFTC rules allow for registration and oversight of self-regulatory associations of futures professionals • The NFA does the same types of regulatory activities as the CFTC but focuses on individuals working in the futures industry (micro-level)

  10. Questions & Comments

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