A commodity market is a market that trades in the primary economic sector rather than manufactured products,such as cocoa,fruit and sugar. Hard commodities are mined,such as gold and oil. Futures contracts are the oldest way of investing in commodities. Commodity markets can include physical trading and derivatives trading using spot prices,forwards,futures,and options on futures. Farmers have used a simple form of derivative trading in the commodity market for centuries for price risk management.
In finance,a futures contract is a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future,between parties not yet known to each other. The asset transacted is usually a commodity or financial instrument. The predetermined price of the contract is known as the forward price. The specified time in the future when delivery and payment occur is known as the delivery date. Because it derives its value from the value of the underlying asset,a futures contract is a derivative.
A futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts defined by the exchange. Futures contracts are derivatives contracts to buy or sell specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future. Futures exchanges provide physical or electronic trading venues,details of standardized contracts,market and price data,clearing houses,exchange self-regulations,margin mechanisms,settlement procedures,delivery times,delivery procedures and other services to foster trading in futures contracts. Futures exchanges can be organized as non-profit member-owned organizations or as for-profit organizations. Futures exchanges can be integrated under the same brand name or organization with other types of exchanges,such as stock markets,options markets,and bond markets. Non-profit member-owned futures exchanges benefit their members,who earn commissions and revenue acting as brokers or market makers. For-profit futures exchanges earn most of their revenue from trading and clearing fees.
The Chicago Mercantile Exchange (CME) is a global derivatives marketplace based in Chicago and located at 20 S. Wacker Drive. The CME was founded in 1898 as the Chicago Butter and Egg Board,an agricultural commodities exchange. Originally,the exchange was a non-profit organization. The Merc demutualized in November 2000,went public in December 2002,and merged with the Chicago Board of Trade in July 2007 to become a designated contract market of the CME Group Inc.,which operates both markets. The chairman and chief executive officer of CME Group is Terrence A. Duffy,Bryan Durkin is president. On August 18,2008,shareholders approved a merger with the New York Mercantile Exchange (NYMEX) and COMEX. CME,CBOT,NYMEX,and COMEX are now markets owned by CME Group. After the merger,the value of the CME quadrupled in a two-year span,with a market cap of over $25 billion.
The Commodity Futures Trading Commission (CFTC) is an independent agency of the US government created in 1974 that regulates the U.S. derivatives markets,which includes futures,swaps,and certain kinds of options.
The Commodity Futures Modernization Act of 2000 (CFMA) is United States federal legislation that ensured financial products known as over-the-counter (OTC) derivatives remained unregulated. It was signed into law on December 21,2000 by President Bill Clinton. It clarified the law so most OTC derivative transactions between "sophisticated parties" would not be regulated as "futures" under the Commodity Exchange Act of 1936 (CEA) or as "securities" under the federal securities laws. Instead,the major dealers of those products would continue to have their dealings in OTC derivatives supervised by their federal regulators under general "safety and soundness" standards. The Commodity Futures Trading Commission's (CFTC) desire to have "functional regulation" of the market was also rejected. Instead,the CFTC would continue to do "entity-based supervision of OTC derivatives dealers". The CFMA's treatment of OTC derivatives such as credit default swaps has become controversial,as those derivatives played a major role in the financial crisis of 2008 and the subsequent 2008–2012 global recession.
Leo Melamed is an American attorney,finance executive,and a pioneer of financial futures. He is the chairman emeritus of CME Group.
A commodity broker is a firm or an individual who executes orders to buy or sell commodity contracts on behalf of the clients and charges them a commission. A firm or individual who trades for his own account is called a trader. Commodity contracts include futures,options,and similar financial derivatives. Clients who trade commodity contracts are either hedgers using the derivatives markets to manage risk,or speculators who are willing to assume that risk from hedgers in hopes of a profit.
CME Group Inc. is an American global markets company. It is the world's largest financial derivatives exchange,and trades in asset classes that include agricultural products,currencies,energy,interest rates,metals,stock indexes and cryptocurrencies futures. The company offers futures contracts and options on futures using its CME Globex trading platforms,fixed income trading via BrokerTec and foreign exchange trading on the EBS platform. In addition,it operates a central counterparty clearing provider,CME Clearing. With a range of pre- and post-trade products and services underpinning the entire lifecycle of a trade,CME Group also offers optimization and reconciliation services through TriOptima,and trade processing services through Traiana.
The Dubai Mercantile Exchange (DME) is a commodity exchange based in Dubai currently listing its flagship futures contract,DME Oman Crude Oil Futures Contract (OQD). Launched in 2007,the DME aims to become the crude oil pricing benchmark for the Asian market with its Oman Crude Oil contract,like the Intercontinental Exchange’s (ICE) North Sea Brent is to Europe and the New York Mercantile Exchange’s (NYMEX) West Texas Intermediate is to North America.
Brooksley Elizabeth Born is an American attorney and former public official who,from August 26,1996,to June 1,1999,was chair of the Commodity Futures Trading Commission (CFTC),the federal agency which oversees the futures and commodity options markets. During her tenure on the CFTC,Born lobbied Congress and the President to give the CFTC oversight of off-exchange markets for derivatives in addition to its role with respect to exchange-traded derivatives,but her warnings were ignored or dismissed,and her calls for reform resisted by other regulators. Born resigned as chairperson on June 1,1999,shortly after Congress passed legislation prohibiting her agency from regulating derivatives.
Sean O'Brien Cota is an American businessman,energy market expert,financial commentator,and policy advisor on American energy and financial market transparency and reform measures. As the President of a third generation family-owned oil company,Cota &Cota Oil,Inc. in Bellows Falls,VT,whom he has worked for since 1977,he became extremely involved in energy commodity trading in 1988. In 2010,he was named Chairman of the Petroleum Marketers Association of America.
Bartholomew Hamilton Chilton was an American civil servant.
A Swap Execution Facility (SEF) is a platform for financial swap trading that provides pre-trade information and a mechanism for executing swap transactions among eligible participants.
A commodity trading advisor (CTA) is US financial regulatory term for an individual or organization who is retained by a fund or individual client to provide advice and services related to trading in futures contracts,commodity options and/or swaps. They are responsible for the trading within managed futures accounts. The definition of CTA may also apply to investment advisors for hedge funds and private funds including mutual funds and exchange-traded funds in certain cases. CTAs are generally regulated by the United States federal government through registration with the Commodity Futures Trading Commission (CFTC) and membership of the National Futures Association (NFA).
ICE Clear Credit LLC,a Delaware limited liability company,is a Derivatives Clearing Organisation (DCO) previously known as ICE Trust US LLC which was launched in March 2009. ICE offers trade execution and processing for the credit derivatives markets through Creditex and clearing through ICE Trust™. ICE Clear Credit LLC operates as a central counterparty (CCP) and clearinghouse for credit default swap (CDS) transactions conducted by its participants. ICE Clear Credit LLC is a subsidiary of IntercontinentalExchange (ICE). ICE Clear Credit LLC is a wholly owned subsidiary of ICE US Holding Company LP which is "organized under the law of the Cayman Islands but has consented to the jurisdiction of United States courts and government agencies with respect to matters arising out of federal banking laws."
J. Christopher Giancarlo is an American attorney and former business executive who served as 13th chairman of the United States Commodity Futures Trading Commission (CFTC). Giancarlo was sworn in as a CFTC commissioner on June 16,2014 for a term expiring on April 13,2019. Starting on January 20,2017,with President Donald Trump's inauguration,Giancarlo began serving as acting chair of the CFTC. In March 2017,the president nominated Giancarlo to be full-time chair of the commission. Giancarlo was confirmed as chairman of the commission by the United States Senate on August 3,2017.
Securities market participants in the United States include corporations and governments issuing securities,persons and corporations buying and selling a security,the broker-dealers and exchanges which facilitate such trading,banks which safe keep assets,and regulators who monitor the markets' activities. Investors buy and sell through broker-dealers and have their assets retained by either their executing broker-dealer,a custodian bank or a prime broker. These transactions take place in the environment of equity and equity options exchanges,regulated by the U.S. Securities and Exchange Commission (SEC),or derivative exchanges,regulated by the Commodity Futures Trading Commission (CFTC). For transactions involving stocks and bonds,transfer agents assure that the ownership in each transaction is properly assigned to and held on behalf of each investor.
Heath Price Tarbert is an American lawyer and former government official who most recently served as the 14th Chairman and a Commissioner of the Commodity Futures Trading Commission (CFTC). Prior to leading the CFTC,he served as Assistant Secretary of the Treasury for International Markets and Development and as acting Under Secretary of the Treasury for International Affairs. As of April 6,2021,he is the Chief Legal Officer of Citadel Securities.
