In 1974 Congress created the Commodity Futures Trading Commission as the independent agency with the mandate to regulate commodity futures and options markets in the United States. The agency is chartered to protect market participants against manipulation, abusive trade practices, and fraud.
Through effective oversight and regulation the CFTC enables the markets to better serve their important function in the nation’s economy, providing a mechanism for price discovery and a means of offsetting price risk. The CFTC also seeks to protect customers by requiring: (1) that registrants disclose market risks and past performance to prospective customers (in the case of money managers and advisors); (2) that customer funds be kept in accounts separate (“segregated funds”) from their own use; and (3) that customer accounts be adjusted to reflect the current market value of their investments at the close of each trading day (“clearing”). Futures accounts are technically safer than securities accounts because brokers must show a zero-zero balance sheet at the end of each trading session.
TIP: The regulatory path of retail FOREX is closely following the path of commodity futures in the 1970s and 1980s—only the pace now has quickened.
National Futures Association
The CFTC was originally created under so-called Sunshine Laws, meaning that its continued existence would be evaluated vis-à-vis its effectiveness. As the futures industry exploded in the late 1970s, not only was its charter renewed but a separate quasi-private self-regulatory agency was created to implement the laws, rules, and regulations. Thus in 1982 was born the National Futures Association (NFA). The NFA is the CFTC’s face to the public and directs the regulatory and registration actions of the CFTC into the marketplace. The NFA stipulates that members cannot transact business with nonmembers. So, for example, if your FOREX broker-dealer is an NFA member, it is not allowed to do business with nonmember money managers (Commodity Trading Advisors or CTAs).
Commodity Futures Modernization Act of 2000
This was the first act by the CFTC pertaining to the then-emerging retail FOREX business. Beginning in the 1980s cross-border capital movements accelerated with the advent of computers, technology, and the Internet— extending market continuum through Asian, European, and American time zones. Transactions in foreign exchange rocketed from about $70 billion a day in the 1980s to more than $2 trillion a day two decades later.
The Patriot Act
A principal feature of the ubiquitous Patriot Act is the desire to limit money laundering so that large transactions might be followed, theoretically ensuring that funds are not headed to finance terrorist activities. It is obvious that such tracking will affect foreign exchange markets. You see reference to the Patriot Act on broker forms when you open an account.
Through effective oversight and regulation the CFTC enables the markets to better serve their important function in the nation’s economy, providing a mechanism for price discovery and a means of offsetting price risk. The CFTC also seeks to protect customers by requiring: (1) that registrants disclose market risks and past performance to prospective customers (in the case of money managers and advisors); (2) that customer funds be kept in accounts separate (“segregated funds”) from their own use; and (3) that customer accounts be adjusted to reflect the current market value of their investments at the close of each trading day (“clearing”). Futures accounts are technically safer than securities accounts because brokers must show a zero-zero balance sheet at the end of each trading session.
TIP: The regulatory path of retail FOREX is closely following the path of commodity futures in the 1970s and 1980s—only the pace now has quickened.
National Futures Association
The CFTC was originally created under so-called Sunshine Laws, meaning that its continued existence would be evaluated vis-à-vis its effectiveness. As the futures industry exploded in the late 1970s, not only was its charter renewed but a separate quasi-private self-regulatory agency was created to implement the laws, rules, and regulations. Thus in 1982 was born the National Futures Association (NFA). The NFA is the CFTC’s face to the public and directs the regulatory and registration actions of the CFTC into the marketplace. The NFA stipulates that members cannot transact business with nonmembers. So, for example, if your FOREX broker-dealer is an NFA member, it is not allowed to do business with nonmember money managers (Commodity Trading Advisors or CTAs).
Commodity Futures Modernization Act of 2000
This was the first act by the CFTC pertaining to the then-emerging retail FOREX business. Beginning in the 1980s cross-border capital movements accelerated with the advent of computers, technology, and the Internet— extending market continuum through Asian, European, and American time zones. Transactions in foreign exchange rocketed from about $70 billion a day in the 1980s to more than $2 trillion a day two decades later.
The Patriot Act
A principal feature of the ubiquitous Patriot Act is the desire to limit money laundering so that large transactions might be followed, theoretically ensuring that funds are not headed to finance terrorist activities. It is obvious that such tracking will affect foreign exchange markets. You see reference to the Patriot Act on broker forms when you open an account.
