29.2 INDUSTRY REGULATION
Asset growth in the managed futures industry has moved in tandem with the growth of regulatory oversight.5 The U.S. Congress acted in 1974 to create the U.S. Commodity Futures Trading Commission (CFTC) as a federal regulatory agency for all futures and derivatives trading. The CFTC's efforts were later joined by the U.S. futures exchanges and the National Futures Association (NFA), an independent, industry-supported self-regulatory body created in 1982.
The NFA, in regulatory partnership with the CFTC, provides the primary oversight in the auditing of member firms. The NFA, as a self-regulatory organization, acts as the principal overseer of FCMs, IBs, CPOs, and CTAs. It carries the primary responsibility to conduct audits, though the CFTC conducts audits as well. The NFA also provides an arbitration program for resolving disputes in the futures industry.
Foreign exchange is one area of the managed futures industry that remains largely unregulated. Futures trading in international currencies came under the purview of the CFTC in 1972, when the International Monetary Market (IMM) was founded in Chicago. The great majority of currency trading is conducted in the over-the-counter (OTC), interbank spot, and forward markets, which are subject to only limited regulation.
As noted, there are a number of regulated entities that participate in the managed futures industry. Some of these are shown in Exhibit 29.1.