Back in 1974, when the US Congress established the Commodity Futures Trading Commission to regulate futures trading, there was no retail foreign exchange trading industry. Even as recently as 2000, when Congress enacted the Commodities Trading Modernization Act (CTMA), the question of who would oversee non-bank trading of FX, other than on the regulated exchanges, was not only unclear, it had probably not even been asked. A year later, Congress attempted to resolve the issue. In its Treasury Amendment, it stated that the CFTC had the mandate to protect retail customers trading in what it called off-exchange FX futures.
At the same time that the CFTC was created, Congress also authorized the formation of registered futures associations to give the futures industry the opportunity to regulate itself. This led to the formation of the National Futures Association, to which the CFTC effectively outsourced regulation.
As a result of the CTMA,...
