The CFTC stands for Commodities Futures Trading Commission and was begun in 1974 to protect investors in the futures and commodities trades. With the new public offerings of forex and massive influxes of individuals never before entering the finance world the need for protection from fraud and manipulation was heightened to new levels.
For 150 years prior to the development of the CFTC futures had been traded on the stock market under federal restrictions but those rulings only kept actual market stability fair without actually regulating how companies worked with clients. Futures trading have always been a primary interest for investors and pertain to the trade of future promised goods such as fruits, grains, and juices still un-harvested but with a ‘future’ date for market. The futures market also deals with currency trading and the ever fluctuating foreign currency values against the dollar.
Throughout its brief history the Commodities Futures Trading Commission has undergone many changes and improvements, all with the focus on promoting open and competitive forex and commodities trading in a safe and secure environment. In December of 2002 Congress demanded the Modernization Act of 2000 to protect single stock futures allowing for price discovery, offsetting of prices and risks, stops abusive practices in commodity trading and for the private investor the CFTC very pointedly protects the integrity of the financial clearing process.
The CTFC is guarded and watched over by federal commissioners who are appointed by the President for terms of five years. There must be a fair split, as much as possible with a total of five individuals, between the political parties within the CTFC. Operating primarily out of Washington, DC but having offices in all cities with Exchanges (New York, Chicago, and Kansas City) the CTFC closely watches all activity on the foreign exchange market and futures stock.
As in no other realm this government watching is a protective measure that allows for freedoms and security for people unable to guard themselves. It makes the rigorous, occasionally dangerous, and always risky world of fx exchange a place where the common man can take part without fear where once only major corporate, or financially powerful families and individuals could play.
The CFTC is made up of six divisions. These are the Division of Clearing and Intermediary Oversight, Division of Market Oversight, Division of Enforcement, Office of Chief Economist, Office of the General Counsel, and Office of the Executive Director.
Every week the CFTC publishes the ‘Commitment of Traders Report’ also known as COT-Report, or COTR. This publication shows all activity for markets of 20 or more active commodity trading participants.
All parties wishing to trade on the foreign exchange or makes trades for others must be registered with the CFTC. The Commodity Futures Trading Commission also makes adamant demands that all persons or companies who make trades for outside individuals clearly post statements of risk that are upfront and honest about the futures trading environment. Forex trading being a big part of the futures trading system is inherent with risks even under strict regulations and everyone who decides to participate should be made to understand those hazards.
Without the CFTC the world of stock trading in futures, or any commodity trading including foreign currency exchange would be a free-for-all that would likely prove hazardous to smaller investors. Historically the dangers have been many even for power players who could afford constant monitoring and legal representation and the Commodities Futures Trading Commission has made sure that the stock market is a place where all can participate on an even playing field.