Who Regulates The Financial Markets?

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When looking at the United States, the financial markets are overseen by two government bodies:

  • SEC (Securities and Exchange Commission)
  • CFTC (Commodity Futures Trading Commission)

These two bodies have similar goals. Preventing fraud and abuse and making sure that investors and traders have all the information to make decisions.


On top of the organizations listed, regulatory groups are put in place by the exchanges themselves. These ensure that all of the traders comply with the rules and rules of organizations. In order to cope with insider trading and market manipulation, exchanges monitor trading, looking for patterns that might indicate that.

Bond market and stock market regulation

These two markets are the most prominent. These market have a lot of small issuers, just like not one government is issuing currency, there are a lot of companies that issue stocks. Regulators are active.

  • The SEC – a government agency making sure the markets work efficiently
  • FINRA – all stock and bond brokerage firms and their employees are represented and regulated by FINRA. To date, almost 5000 firms and more than 600,000 employees are registered to sell securities. On top of that FINRA also does background check and licensing exams. They also provide information for traders and investors and regulate securities trading, making sure firms comply.

Forex Regulation

Forex is the largest and most liquid market in the world. The fx markets are not well regulated. Let's take a tourist for example. There is nothing stopping him from exchanging U.S. dollars for Euro. There is no regulation, no oversight and no hassle. Regulation isn't necessary for someone at the local shop, buying a can cola for example. This has allowed some firms  to misrepresent forex trading and day traders getting badly burned in the process.

Futures on currency and options

Currency is traded in the spot, which is not regulated. Trades exchange currencies at current exchange rate. Quite a lot of traders use futures and options to trade currencies. These are regulated as derivatives through bodies like the NFA and CFTC.


Most forex trading is done by banks, which are heavily regulated. The Federal Reserve Banks along with U.S. Treasury Department oversee the forex markets looking for patterns of money laundering and manipulation.

Derivatives regulation

Derivatives markets have their own regulatory bodies.

  • Commodity Futures Trading Commission (CFTC) – this government agency oversees market activities in financial and agricultural commodities. CFTC makes sure both parties on an options or futures contract are able to meet  the obligations. They also enforce that the self-regulatory organizations and exchanges have all the regulations in place and respected.
  • National Futures Association (NFA) –  This organization regulates over 4,000  firms and their employees working in  the futures exchanges. NFA does background checks along with licensing exams. It also regulates futures trading and makes sure firms comply.