The Commodity Futures Trading Commission (CFTC) is a Federal agency which was established by the Commodity Futures Trading Commission Act of 1974. The Commission replaced the Commodity Exchange Authority. Its role is to ensure the open and efficient operation of the futures and options markets.
Futures have been traded for over 150 years and have functioned under the auspices of the U.S. Government since the 1920s. Only recently have futures expanded beyond their agricultural roots, moving into government securities and stock indices as well as foreign currency.
Five market commissioners are appointed by the president and are subject to Senate approval. The commissioners serve a five year term, and are elected in a staggered manner. No more than three commissioners may be of one political party at a time. Their role is to protect investors from unscrupulous parties which would manipulate the market and/or engage in abusive trade practices and fraud.
The CFTC has undergone many changes since 1974, the latest of which took place when Congress passed the Commodity Futures Modernization Act of 2000. This Act instructed the SEC and CFTC to put together a joint regulatory body for single-stock futures – those where only one stock was the underlying asset. Unfortunately, the CFTC has been challenged by the SEC many times in an attempt to usurp regulatory jurisdiction.
Part of the role of the CFTC is to encourage competition and efficiency as well as integrity. Effective supervision allows the CFTC to ensure that future markets will continue to provide a means for price discovery while offsetting price risk.