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USA’s Commodity Futures Trading Commission (CFTC)

Origins of the CFTC

The CFTC (Commodity Futures Trading Commission), created by the U.S. Congress with the Commodity Futures Trading Commission Act, is an independent US government agency. It was created in 1974 to replace the U.S. Department of Agriculture’s Commodity Exchange Authority, whose remit was the regulation of trading in specific commodity futures, increasing exchanges’ public transparency and limiting the amount of market manipulation.   

What is the CFTC’s Purpose? 

The CFTC’s core functions are to promote derivatives markets’ competitiveness and efficiency, protect market actors from manipulation, exploitative trading practices and fraud as well as govern the financial clearing process. 

Since its founding in 1974, the CFTC’s remit has grown. In December of 2000, Congress passed the Commodity Futures Modernization Act of 2000, mandating that the CFTC and the SEC (Securities and Exchange Commission) jointly develop a regulatory regime for single-stock futures.

The CFTC’s remit was expanded again in 2010 with the Dodd-Frank Wall Street Reform and Consumer Protection Act to include the swaps market. 

What Does the CFTC Oversee? 

As of 2014, the following fell under the CFTC’s remit:

  • OTC (over-the-counter) markets
  • Designated Contract Markets (DCMs) or exchanges
  • Swap Execution Facilities (SEFs)
  • Derivatives Clearing Organisations
  • Swap Data Repositories (SDRs)
  • Swap dealers
  • Futures commission merchants
  • Commodity pool operators and other intermediaries

Organisation 

Not including the Office of the Chairman, the Executive Leadership Team, and the Office of the Inspector General, the CFTC consists of 13 operating divisions and offices:

  • Clearing and Risk (DCR)
  • Enforcement (DOE)
  • Market Oversight (DMO)
  • Market Participants Division (MPD)
  • Division of Data (DOD)
  • Division of Administration (DA)
  • Office of the Chief Economist (OCE)
  • Office of the General Counsel (OGC)
  • Office of International Affairs (OIA)
  • Office of Public Affairs (OPA)
  • Office of Legislative and Intergovernmental Affairs (OLIA)
  • Office of Minority and Women Inclusion (OMWI)
  • Office of Technology Innovation

CFTC and the SEC

In a nutshell, these are two different organisations with different responsibilities, and with different means of fulfilling those responsibilities at their disposal. 

The most fundamental difference between these two governmental agencies is that the CFTC regulates the derivatives market, while the SEC regulates the securities market. 

The CFTC and Regulating the Crypto Market

The CFTC – not the better-known SEC – is most likely going to be the U.S. government organisation responsible for regulating digital commodities. On 03/08/2022 4 U.S. Senators introduced the Digital Commodities Consumer Protection Act of 2022. As of the time of publication, this piece of legislation has not been voted on, but could potentially have wide-reaching implications on the regulation of crypto assets in the U.S. 

However, the situation is far from clear. The SEC sees many crypto coins as securities – which it regulates – as opposed to commodities, which are regulated by the CFTC.

Currently, crypto fund managers that invest in crypto futures must be licenced with the CFTC as a Commodity Trading Advisor and Commodity Pool Operator. This also applies to fund managers using leverage/margin trading.

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