Commodity Futures Modernization Act - CFMA


DEFINITION of 'Commodity Futures Modernization Act - CFMA'

An act passed in 2000 by the U.S Government that reaffirmed the authority of the Commodity Futures Trading Commission for five years as the regulatory body of the American futures markets. The most significant outcome from this act was the allowance for the trading of single stock futures.

BREAKING DOWN 'Commodity Futures Modernization Act - CFMA'

Up until the CFMA was passed, it was illegal for traders to trade single stock futures even though they were being traded in other parts of the world. The amount of leverage provided by these financial instruments has given professional traders a new way to obtain exposure to the equity markets.

  1. Clearing House

    An agency or separate corporation of a futures exchange responsible ...
  2. Futures Market

    An auction market in which participants buy and sell commodity/future ...
  3. Leverage

    1. The use of various financial instruments or borrowed capital, ...
  4. Commodity Futures Trading Commission ...

    An independent U.S. federal agency established by the Commodity ...
  5. Single Stock Future - SSF

    A futures contract with an underlying of one particular stock, ...
  6. Implied Volatility - IV

    The estimated volatility of a security's price.
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  1. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  2. Can mutual funds invest in commodities?

    Mutual funds can invest in commodities. In fact, mutual funds may provide a better way for investors to gain exposure to ... Read Full Answer >>
  3. How do futures contracts roll over?

    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  4. Why do companies enter into futures contracts?

    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>
  5. What does a futures contract cost?

    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>
  6. What are the main risks associated with trading derivatives?

    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>

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