The Commodity Futures Modernization Act of 2000 (CFMA) was an overhaul of the Commodity Exchange Act (CEA) -- the first substantive revision in more than 20 years. Signed into law by President Bill Clinton on December 21, it was intended to update the regulatory structure and to clarify the legal status of derivative products. It authorized futures trading on single stocks and narrow-based stock indices and provided legal certainty for swaps and hybrid instruments. It also gave the Commodity Futures Trading Commission (CFTC) limited jurisdiction over retail OTC foreign currency transactions.
In the process, the 280+ pages of text also amended some securities, banking and bankruptcy laws.
The law kept a general prohibition against trading a futures contract in the U.S. other than on a CFTC-regulated market. It also retained the U.S. Commodity Futures Trading Commission's (CFTC) authority to make exemptions from all of the parts of the CEA. In addition, it created specific exclusions and exemptions for over-the-counter (OTC) products and transactions executed on electronic trading platforms between certain parties.
The CFMA repealed the prohibition of the trading of futures contracts on nonexempt individual securities and narrow-based indexes of securities and established a complex framework for trading security futures products on futures or securities exchanges. Trading so-called single stock futures products wasn't allowed to start until a year later, however, with the intention of giving the CFTC and U.S. Securities and Exchange Commission time to make the necessary regulatory changes.
- CFMA heralds new era for futures industry. National Futures Association.
Text of HR 5660, the Commodity Futures Modernization Act of 2000