Things to Know if You Are About to Trade Commodities

The Commodity Futures Trading Commission (CFTC) is the federal government agency that regulates the commodity futures, commodity options, and swaps trading markets. To help fight fraud, Congress established the CFTC Customer Protection Fund in 2010 and the agency created an Office of Consumer Outreach in 2011. While most individuals do not trade in the commodities markets, the CFTC’s Office of Consumer Outreach has information for those that do.

Always follow these basic principles before you trade in the commodities markets:

  • Ensure that you can lose all of your investment and still be financially secure because it is “risk capital”
  • Check to make sure you have your risk disclosure documents
  • Determine if you will rely on advice from a broker or make your own trading decisions
  • Understand your financial obligations in commodity futures and option contracts

There is a great deal of fraud in the commodities markets. Fraudsters steal money from unsuspecting investors and traders. These are a few ways that fraudsters try to beat you out of your money:

  • Downplay the importance of the disclosure statement
  • Tell you to borrow money to invest
  • Guarantee profit or boast about past performance
  • Promise profits due to "predictable" seasonal or market cycles
  • Make “can’t miss claims” based on information already known to the public 

You can beat the fraudsters by checking their registration status and background at the National Futures Association’s Background Affiliation Status Information Center (BASIC).

If you have questions, are aware of suspicious activities, or believe you have been defrauded, please let the CFTC know immediately at www.cftc.gov/TiporComplaint.

To learn more about protecting yourself before trading commodities, please visit www.cftc.gov/consumerprotection.

 

Blog Topic: 
Investing

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