The Commodities Exchange Act (“CEA”), 7 U.S.C. § 1 et seq., prohibits fraudulent conduct in the trading of futures contracts. The stated mission of the CFTC is to foster open, transparent, competitive, and financially sound markets, to avoid systemic risk, and to protect the market users and their funds, consumers, and the public from fraud, manipulation, and abusive practices related to derivatives and other products that are subject to the Commodity Exchange Act. After the Financial crisis of 2007–2008 and since 2010 with the Dodd–Frank Wall Street Reform and Consumer Protection Act, CFTC has been transitioning to bring more transparency and stricter regulation to the multitrillion dollar swaps market.
Futures contracts for agricultural commodities have been traded in the U.S. for more than 150 years and have been under Federal regulation since the 1920s. The Grain Futures Act of 1922 set the basic authority and was changed by the Commodity Exchange Act of 1936 (7 U.S.C. 1 et seq.).
Since the 1970s, trading in futures contracts has expanded rapidly beyond traditional physical and agricultural commodities into a vast array of financial instruments, including foreign currencies, U.S. and foreign government securities, and U.S. and foreign stock indices.
Congress created the CFTC in 1974 as an independent agency with the mandate to regulate. The Commodity Futures Trading Commission Act of 1974 (P.L. 93-463) created the CFTC to replace the U.S. Department of Agriculture‘s Commodity Exchange Authority as the independent federal agency responsible for regulating commodity futures and option markets in the United States. The Act made extensive changes in the basic authority of the Commodity Exchange Act (CEA) of 1936, which itself had made extensive changes in the original Grain Futures Act of 1922. (7 U.S.C. 1 et seq.).
CFTC’s mandate was renewed and expanded in December 2000 when Congress passed the Commodity Futures Modernization Act of 2000, which instructed the Securities and Exchange Commission (SEC) and the CFTC to develop a joint regulatory regime for single-stock futures, the products of which began trading in November 2002. As of 2003 the growth in the value of swaps had exploded since their introduction in the late 1970s.
In 2010, the Dodd–Frank Wall Street Reform and Consumer Protection Act, expanded the CFTC’s authority into the swaps markets, to prohibit the reckless use of manipulative schemes without -as in the past- having to prove the specific intent of the accused to affect prices and the existence of an artificial price.