Generally, regulation of the U.S. financial markets is divided between the Securities and Exchange Commission (“SEC”), with authority over securities, and the Commodity and Futures Trading Commission (“CFTC”), with authority over futures/derivatives. See Gary Rubin, CFTC Regulation 1.59 Fails to Adequately Regulate Insider Trading, Note, 53 N.Y.L. SCH. L. REV. 599, 606 (2008-09). The Commodity Exchange Act (“CEA”) of 1936 was the first major congressional initiative aimed at regulating derivatives. See Commodity Exchange Act of 1936, ch. 545, 49 Stat. 1491 (1936) (codified as amended at 7 U.S.C. § 1 (2006)); see also id. at 604. Generally, the CEA expanded upon prior acts by increasing the Secretary of Agriculture’s authority and making it “unlawful to engage in commodity brokering without first registering with the secretary.” Rubin, supra, 53 N.Y.L. SCH. L. REV. at 605 (citing CEA § 5, 49 Stat. at 1492-97).
The CFTC was established by the Commodity Futures Trading Commission Act (“CFTCA”) of 1974, which granted the CFTC the exclusive authority to regulate futures contracts. See 7 U.S.C. § 2(a)(2). The CFTC is a federal regulatory body that regulates the entire commodities futures industry. In its mission statement, the CFTC describes its main purposes as preventing fraud and promoting competition, stating, “[t]he CFTC’s mission is to protect market users and the public from fraud, manipulation, and abusive practices related to the sale of commodity and financial futures and options, and to foster open, competitive, and financially sound futures and option markets.” CFTC, About the CFTC, http://www.cftc.gov/About/MissionResponsibilities/index.htm.
Prior to the enactment of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act” or “the Act”), the CFTC was viewed as “a regulatory agency with a small bark and even less bite.” Peter J. Henning, C.F.T.C. Is Set to Get Tougher on Fraud, New York Times, Dealbook, available at http://dealbook.nytimes.com/2010/11/01/c-f-t-c-is-set-to-get-tougher-on-fraud/. However, with the enactment of the Dodd-Frank Act, the CFTC has gained new authority to regulate derivatives, credit default swaps and the exchanges that will trade these contracts.
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