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Criminal Portions of the Commodity Exchange Act
To start with, you need to understand what the Commodity Exchange Act is and what it provides.
It is found in chapter 545, 49 Statute. 1491, and was enacted back in 1936 June the 15th. This federal act was passed in 1936 by the Government of the United States, replacing the 1922’s Act on Grain Futures Act.
This act provides that federal regulations of every commodity and future trading activities should require futures and commodity options and must be traded on organized exchanges. The CFTC, Commodity Futures Trading Commission in 1974 was created due to the Commodity Exchange Act. Further in 1982, the NFA also referred to as the CFTC launched the National Futures Association.
List of Commodities
Today, there are so many commodities being traded. However, they have been categorized into three major groups. These categories include Agriculture, metals, and energy.
Agricultural commodities comprise of
• Any agricultural products that can be drunk example cocoa, sugar, coffee, and orange juice. They are referred to as softs market.
• There is also the grains category which comprises wheat, soybean oil, soybeans, oat, rice, and corn
• Another one is the animals that became food. These include live cattle and lean hogs or pork
• The last on this category would be an agricultural product that you wouldn’t eat. Lumber and cotton would make the best example.
The next category would feature energy. In this category, RBOB gasoline, crude oil, natural gas, and heating oil are the primary examples. Commodities that trade in big determinant in setting the oil prices are also included here.
The last category includes the mined commodities like copper, silver and also platinum. Earlier on, the London metal exchange reported that they would come up with features contracts for the metals that are used in batteries in 2019. This exchange is convinced that there will be a tremendous market for the metals as their demand keeps growing by the day since electric vehicle are on rampant production in the current century.
Commodities Is A Business Term
If you pursued business as a discipline in university, then you know that it can be defined as goods and services that one buys and sells purely on price. Commodities can include the traded commodities, and they could also comprise the products that are not very much differentiated from others based on benefits, brand or other distinguishing features.
A good example would be Coca-Cola, which is a brand product which receives massive loyalties and is priced higher since it is perceived of being different from the rest of cola drinks. Therefore, what might seem to be a low-cost store brand is a commodity since it is not much different from other brands of stores. It is also bought primarily since it comes in a low cost and not its taste.
How Does Commodities Market Work?
The commodities trading determines the prices of all commodities. This, therefore, makes the prices of everyday products to be volatile. This is why you see the prices of gasoline changing every other day. Dealers of items trade their merchandise in the open market thus the change in price every other day. In most cases, the ordinary consumer finds themselves in crossroads due to the price variation in the everyday products like meat, gasoline, and grains. The price fluctuation has a toll on more impoverished people across the world that have no option but pay more for their limited income on transportation and feeding. It also has a toll on farmers, as it makes it riskier to farm. This is the main reason why not only the US government but also governments across the world provide subsidies on farm inputs.
In the exchanges, the highest volume of trading is in oil, agricultural products, and metals such as gold. Of cause, no one wants to transport such heavy materials; they are traded in future contracts instead. Commodities contracts are always priced in US dollars. This, therefore, means that when there is a rise in the value of the dollar, one would need fewer dollars to buy the exact amount of the commodities, and thus the price of the product goes down.
Financials which are currencies also are traded in future contracts. A good example would be the 3- month Eurodollar and the Euro-Fix. They may as well include interest rates like the 10-year Treasury note. Stock indices are also traded in future contracts; the best example is the S&P 500. However, the Commodity Exchange Act does not clearly define these as commodities.
Violation of The Act
- If you Intentionally manipulate price during a call auction
- If you intentionally manipulate price during the Continuous Trading, also known as Zabara
- When you manipulate price during the Settlement Price Calculation Period when you trade individually in collaboration with others with the intention to manipulate the settlement price
- When you fake orders or spook
- Front running
- Transferring profits
When you perform the above and much, you will be violating the trade practice act as stipulated by The CFTC. You, therefore, need to search for a competent Commodity attorney to represent you in a federal court of law.