The Commodities Exchange Act, passed in 1936, established regulations for futures and commodities trading in the US. It stabilized investment after the 1929 stock market crash, reduced illegal trading, and created a federal infrastructure for administration. The Commodity Futures Trading Commission and National Futures Association were created to enforce the act.
The Commodities Exchange Act is a federal law that was approved and promulgated by the government of the United States of America on June 15, 1936. Replacing the Grains Futures Act of 1922, the Commodities Exchange Act created a standard and a network of supervision of the regulation of any futures trading and commodity regulation with the country. Part of this standard required all trading in futures and commodity options to take place on a recognized and legally functioning stock exchange.
By setting a standard for futures and commodities trading in the United States, the Commodities Exchange Act performed several important tasks. First, the law helped stabilize the general framework for investment and investors, which was still very shaky after the stock market crash of 1929. Some of the provisions contained in the statutes of the law were specifically geared towards qualifying prospective investors and thus to avoid some of the factors that led to the previous crash.
Second, the Commodities Exchange Act helped regulate the routes that could be used to trade commodities. By ensuring that trading was done through exchanges that operated within guidelines set by the federal government, it became possible to reduce the amount of illegal trading taking place at the time. The provisions within the law were broad enough to allow the government to investigate any suspicious activity and often to protect the best interests of legitimate investors.
Finally, the Commodities Exchange Act laid the foundation for the creation of a robust infrastructure at the federal level to administer the provisions contained in the act. While various organizations within the government worked together to enforce the provisions, the Commodity Futures Trading Commission was established in 1974 to centralize these efforts. The CFTC continues to administer the Commodities Exchange Act today. To aid in the process, the CFTC created the National Futures Association in 1982. As part of the efforts of the two entities, all options and futures contracts are traded on organized commodity exchanges and are subject to review for compliance with standards set by the Commodities Exchange Act.
Smart Asset.
Protect your devices with Threat Protection by NordVPN
