What is the law on the modernization of commodity futures?
The Futures Futures Act was approved by Congress and signed by President Bill Clinton in December 2000. It was an attempt to resolve the dispute between the Securities Commission (SEC) and the CFTC Commission (CFTC). At that time, Congress enacted legislation to expand the extent of what was defined as a commodity. This resulted in a certain overlap between the SEC and CFTC control range.
Originally, commodities were usually agricultural products and raw materials. Things like pork abdomen, corn, wheat and oil are common commodities. Markets developed for these products and standard contracts have been developed and then were purchased and sold.
For example, in Chicago Board of Trade, in May 2006, it is possible to purchase a contract for 5,000 wheat bushings in December 2006. There are two types of buyers on this market: an end user like the investor's flour mill. The end user is on this market because they know they will need 5 00 in December0 pounds of wheat. The investor is in this market expecting to make a profit. The investor hopes to buy wheat for a certain amount for a bush and sells it for an increased amount in December.
There are basically two types of sellers: farmers or commodity manufacturer and investor. The investor in the purchase example will eventually be a seller because they do not have 5,000 wheat pounds. Although the price in December is lower than what the investor has paid for it, the investor sells the commodity in December.
Farmers can sell when they want. They are usually sold after harvesting, so they know the amount they have in their hand, but they can also sell before harvesting to pay for the materials needed for their crop. However, they sell more than they grow, they will have to become buyers when the contract is to replace a short decline.
Investors liked this process so much that someone has decided to start healing shares as if thatwere commodities. For example, in June 2005, someone started selling a contract for the delivery of 100 shares of General Electric (GE) in December 2006. This type of financial instrument is called a contract for only actions . It is this type of contract that has resulted in the Modernization Act of commodity futures, which was drawn up and handed over.
Everything in public markets tends to quickly regulate by some control body. One Futures agreement for shares had the features of a commodity that is governed by CFTC, and shares that follow the SEC. Both agencies wanted jurisdiction before transactions of this type of financial instrument. In the age of 80 they could not agree and the result was that this typinance tool was banned. Because the demand for this instrument was and this type of tool was sold in European markets, Congress has entered a dispute with the law on the modernization of commodity futures. The purpose of the Modernization Act was to solve the dispute between the two government bodies because they could notto agree.
In 2000, Congress passed the law on the modernization of commodity futures and futures for individual stocks could soon be sold in the American markets. Many questions, however, have been left unresolved and the product trading on the retail level has been forbidden until August 2003. The Modernization Act does not specify which exchange could trade this tool, and at first many exchanges were set to the market for this product. Today, however, futures are traded for individual shares mainly on the exchange of Onechicago, a joint venture between the Chicago Options Council, Chicago Mercantile Exchange and Chicago Board of Trade.
Futures with individual shares were popular in European markets and are now thanks to the Modernization Act, which is slowly caught in the US. More about futures for individual shares and business with this tool can be found on the exchange of ONECHICAGO.