The mission of the Commodity Futures Trading Commission (CFTC or Commission) is to protect market users and the public from fraud, manipulation, abusive practices and systemic risk related to futures, options and swaps and to foster open, competitive, and financially sound markets. Congress established the CFTC as an independent agency in 1974, after its predecessor operated within the Department of Agriculture. Its mandate was renewed and/or expanded in 1978, 1982, 1986, 1992, 1995, 2000, 2008 and 2010. The CFTC and its predecessor agencies were established to protect market users and the public from fraud, manipulation and other abusive practices in the commodity futures and options markets. After the 2008 financial crises and the subsequent enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act or DFA), the CFTC’s mission expanded to include oversight of the swaps marketplace.
The Commission administers the Commodity Exchange Act (CEA), 7 U.S.C. section 1, et seq. The 1974 Act brought under Federal regulation futures trading in all goods, articles, services, rights and interests; commodity options trading; leverage trading in gold and silver bullion and coins; and otherwise strengthened the regulation of the commodity futures trading industry. It established a comprehensive regulatory structure to oversee the volatile futures trading complex.
On July 21, 2010, President Obama signed the Dodd-Frank Act. The Dodd-Frank Act amended the CEA to establish a comprehensive new regulatory framework for swaps, as well as enhanced authorities over historically regulated entities. Title VII of the DFA, which relates to swaps, was enacted to reduce systemic risk, increase transparency and promote market integrity within the financial system by, among other things:
Though the Commission has much experience regulating the on-exchange derivatives marketplace— having done so for more than 70 years— the Dodd-Frank Act presents new responsibilities and authorities. The U.S. swaps and futures market estimate $300 trillion and $40 trillion, respectively— that is more than $22 of derivatives for every dollar of goods and services produced in the U.S. economy. That is why it is essential that the Commission ensure that these markets work for the benefit of the American public; that they are transparent, open and competitive; and that they do not allow risk to spread through the economy.
The Dodd-Frank Act gives the CFTC flexibility to set effective dates and a schedule for compliance with rules implementing Title VII of the DFA, consistent with the overall deadlines in the DFA. The order in which the Commission finalizes the rules does not determine the order of the rules’ effective dates or applicable compliance dates. Phasing the effective dates of the DFA’s provisions will give market participants time to develop policies, procedures, systems and the infrastructure needed to comply with the new regulatory requirements.
In February 2011, the Commission published a new Strategic Plan integrating the expanded responsibilities under the Dodd-Frank Act with its existing mission and goals. The goals of the CFTC largely remain the same with the regulation of swaps being incorporated within the regulatory structure currently applied to the futures and options markets. The CFTC’s primary focus will be to write the rules to regulate the swaps markets, implement those rules, test and adjust those rules and write new rules as necessary to bring effective regulation to all derivatives markets over the next five years.
The Commission’s strategic goals for FY 2011-2015 are:
The focused rule writing efforts required by the Dodd-Frank Act are not being treated as a "Strategic Goal" but as a tactical goal that has an Objective, Strategy and Performance Measure. The CFTC believes developing and implementing the Dodd-Frank Act rules is one of the most important and difficult efforts it has ever undertaken. The Dodd-Frank Act set a timeframe of 360 days (or less in a few instances) for completion of the rules, but the agency was unable to comply with this for several reasons:
The comment and consideration aspects of the rule-making process take an enormous amount of time and the Commission will continue to ensure all appropriate thought is given to rule development. At this point the CFTC anticipates completion of the vast majority of the rules within 24 months of enactment of the Dodd-Frank Act.
The Commission consists of five Commissioners. The President appoints and the Senate confirms the CFTC Commissioners to serve staggered five-year terms. No more than three sitting Commissioners may be from the same political party. With the advice and consent of the Senate, the President designates one of the Commissioners to serve as Chairman. The Commission is headquartered in Washington D.C. with regional offices in Chicago, Kansas City and New York.