| Updated: September 12, 2025Regulatory framework, Part II – the United States
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This lesson will cover the following
- Financial Industry Regulatory Authority (FINRA) in the United States
- Commodity Futures Trading Commission (CFTC) in the United States
- The National Futures Association (NFA) in the United States
Regulators of the stock market
Financial Industry Regulatory Authority (FINRA) in the United States
FINRA is the successor to the National Association of Securities Dealers Inc. (NASD), which performs financial regulation of member brokerage firms and organised markets (exchanges). Formed on 30 July 2007, it is the biggest independent regulator for all securities firms operating in the United States. FINRA oversees 4,250 brokerage companies, 162,155 branch offices and 629,525 registered securities representatives. It regulates trading in stocks, corporate bonds, futures and options on securities. FINRA also provides licences to individuals, admits firms to the industry, establishes a framework of rules to govern the behaviour of firms, monitors how member firms comply with this framework, provides education and qualification examinations to industry professionals, and publishes educational information for public use.
Its predecessor, the NASD, established the NASDAQ (National Association of Securities Dealers Automated Quotations) stock market in 1971. In 2000 the NASD divested NASDAQ and returned to its self-regulatory organisation status. Although the two were separate, brokerage firms trading securities on NASDAQ had to be members of the NASD.
- Trade Forex
- Trade Crypto
- Trade Stocks
- Regulation: NFA
- Leverage: Day Margin
- Min Deposit: $100
The NASD required brokers to know their clients and to determine whether a particular investment strategy was suitable for them.
Major stock exchanges in the United States
The New York Stock Exchange (NYSE), the American Stock Exchange (ASE) and NASDAQ have their own regulatory bodies, which examine whether companies whose securities are traded on the exchange meet the criteria for listing on that exchange. Among these criteria are the requirements for a minimum number of shares actually traded, minimum market capitalisation, minimum annual income and accurate, timely financial reporting to the SEC.
In order to be listed on the NYSE, a company must have issued at least 1,000,000 shares of stock worth $100,000,000 and must have earned over $10,000,000 during the past three years.
In order to be listed on NASDAQ, a company must have issued at least 1,250,000 shares of stock worth at least $70,000,000 and must have earned over $11,000,000 during the past three years.
Stock exchanges play several important roles in the economy: they raise capital for businesses, mobilise savings and transform them into investments, facilitate company growth, serve as barometers of the economy, contribute to good corporate governance, create investment opportunities for smaller investors, and facilitate capital raising for government development projects.
Exchanges also monitor the way securities are traded and scrutinise the trading process for patterns that point to market manipulation and insider trading. Each exchange cooperates with a number of brokerage firms that have access to trading on the exchange itself. A major objective of such co-operation is to ensure that brokerage companies know who their clients are and that they have appropriate systems to detect whether those clients comply with regulations.
Regulators of the derivatives market
Derivatives (options, futures and forwards) derive their value from an underlying asset or security such as a stock, currency, index or commodity. The derivatives market is popular with day traders because it provides exposure to interest rates and the market performance of a particular security using less capital than would be required to trade the equivalent number of shares directly. For a more detailed discussion of the different types of derivatives and how they are traded, visit our forex trading guide.
Commodity Futures Trading Commission (CFTC) in the United States
The CFTC is an independent federal government agency regulating futures and options markets. It was established on 15 April 1975 to oversee market activities concerning commodities and financial futures and options. Based in Washington, D.C., the CFTC has five commissioners appointed by the US President and confirmed by the Senate, each serving a five-year term. One of the commissioners is designated as the Chairman. No more than three commissioners at any time can belong to the same political party.
Futures trading had been regulated by the US Department of Agriculture for decades, as it involved primarily agricultural commodities such as pork, corn, coffee and so on. As demand for new trading instruments, such as currency futures, increased, a new regulatory body was required.
The CFTC is entrusted with two major functions:
First, to make certain that the markets remain liquid and that both parties to any futures or options contract are able to meet their obligations.
Second, to oversee the markets by ensuring that exchanges and self-regulatory organisations have sufficient regulations in place and that those regulations are enforced.
The National Futures Association (NFA) in the United States
The NFA is an independent self-regulatory organisation overseeing the commodities and futures industries in the country. It regulates 4,200 companies and has 55,000 employees operating on various futures exchanges. Its functions include registration, arbitration and compliance with the regulatory framework. Companies or individuals accepting orders for commodity contracts traded on an exchange are known as futures commission merchants (FCMs).
Major exchanges
The Chicago Board Options Exchange (CBOE), Chicago Board of Trade (CBOT), Chicago Mercantile Exchange (CME), New York Board of Trade (NYBOT) and New York Mercantile Exchange (NYMEX) have their own regulatory bodies, which ensure that traders uphold the rules of the exchange itself and the rules set by other organisations, such as the CFTC.
Regulators of the foreign exchange market
In our forex trading guide we devote a large portion of the first chapter to the features, advantages, major players and the role of brokers in the foreign exchange market. In the current article we shall only note that, when it comes to regulation, it is still a largely unregulated segment of the financial markets. There is no international organisation or agency that oversees inter-bank trading activity. There is no obstacle, for instance, for travellers to exchange Canadian dollars for Swiss francs. In addition, most currencies are traded in the spot market, as we have already discussed. Forex traders usually operate in the spot market, which is not regulated. However, there are traders who prefer to trade currencies in the derivatives market because of the opportunity to hedge their positions against the risk of unexpected changes in exchange rates. Options and futures contracts with currencies as underlying assets are regulated as derivatives by the CFTC, the NFA and the respective major futures exchanges.
It is vital to note that if you consider operating in an unregulated market such as forex, your own research into the risks and rewards of this market segment is your primary protection. Banks are among the major players in this market (as we discussed in our forex trading guide) and, when it comes to strict regulation, it is these institutions that are usually referred to.