Which of the following entities is the primary government regulator of futures markets in the U.S.? Select one A. CBOE. B. FINRA. C. SEC. D. CFTC
The correct answer and explanation is:
Correct Answer: D. CFTC
The Commodity Futures Trading Commission (CFTC) is the primary government regulator of the futures markets in the United States. It was established in 1974 as an independent agency to oversee commodity futures and options markets. The main purpose of the CFTC is to promote the integrity, resilience, and vibrancy of the U.S. derivatives markets through sound regulation.
Futures markets involve agreements to buy or sell an asset at a predetermined price at a future date. These markets are used for hedging risk and for speculative purposes. Due to the complexity and financial risk involved, government oversight is essential to ensure transparency, prevent manipulation, and protect market participants.
The CFTC regulates trading on futures exchanges such as the Chicago Mercantile Exchange (CME) and the Intercontinental Exchange (ICE). It also monitors clearinghouses, swap dealers, and other market participants. The agency enforces rules related to fraud, market manipulation, and abusive trading practices. It also sets limits on speculative trading to reduce systemic risk.
Other agencies listed do not have direct oversight of the futures markets. The CBOE (Chicago Board Options Exchange) primarily deals with options, not futures. FINRA (Financial Industry Regulatory Authority) is a self-regulatory organization that governs broker-dealers and securities firms, but not futures markets. The SEC (Securities and Exchange Commission) regulates the securities markets, including stocks and bonds, but does not have jurisdiction over commodity futures, which fall under the authority of the CFTC.
The CFTC also works closely with other domestic and international regulators to address emerging risks, such as those associated with digital assets and climate-related financial products. Its goal is to maintain fair and orderly markets that support economic stability and investor confidence.