Binary Options CFTC
Posted By admin on May 20, 2015
When the first binary options trades were carried out on the Over the Counter (OTM) market in the early 2000s, there was no credible official body to regulate the market. The dealers, brokers and other financial players came together and formed their own self-regulatory agency. However, in 2008, the binary options market went liberal, and the topic of regulation then became a thorny issue among various market players and observers.
When the markets also experienced a downturn in 2008 due to mismanagement of various investment vehicles, it prompted the Securities and Exchange Commission (SEC) of the United States to formulate a regulatory system for the new financial instruments in the market. The result was the formation of the Commodity Futures Exchange Commission (CFTC) to regulate financial trading in the US market.
An Introduction to the CFTC
In the 1920s, attempts were made to institute laws to govern different trades, but these were mostly effective in the agricultural sector for products like wheat and corn. Over the ensuing decades, the financial sector was diversified and expanded, producing many more trading products and assets including currencies, stocks and indices. In 1974, the US congress ratified the Commodity Futures Trading Commission Act, paving the way for the formation of the CTFC. Before this, the commodity market was not adequately governed.
The US government instituted these policies mainly to address the challenges of a rapidly evolving financial market. The CTFC, as an independent agency, was tasked with the enforcement of these governing policies and to protect US citizens from the scams that can sometimes happen in poorly regulated financial markets and harm the traders’ economic interests.
How the CFTC Works
The CTFC has the regulatory authority to protect the public from fraudulent practices in the financial markets that could prove to be costly to traders. The agency comes up with relevant policies to keep the options and futures market adequately competitive and stable, as well as maintaining transparency in dealings, ensuring that no hidden costs can be levied on traders without their consent. The Commodity Futures Trading Commission consists of two major divisions in its operations.
The first sub-group has three branches, which are the Market Oversight Division, the Enforcement Division and the Clearing and Intermediary Division. These three working units are tasked with monitoring and enforcing the laws put in place to govern the options and futures markets. The second sub-group also consists of three units, namely the General Counsel Office, the Executive Director’s Office and the Chief Economist’s Office. These units deal with the management and legal parts of the CTFC’s operations.
The CFTC has developed into a credible regulatory agency with the primary goal of maintaining the options and futures markets’ economic stability and to foster their efficiency and productivity. By formulating policies to ensure honesty and fairness in the operations of the brokers, this agency also works to counter any fraudulent attempts to manipulate the financial markets.
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