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{{Financial market participants}}
{{Financial market participants}}


A '''Commodity Trading Advisor''' ('''CTA''') is an individual or organization who is retained by a fund or individual client to provide advice and services related to trading in [[futures contract]]s and commodity [[option (finance)|options]].<ref name=Lemke>{{cite book |title=Hedge Funds and Other Private Funds: Regulation and Compliance 2011-2012 Edition |last=Lemke |first=Thomas P. |coauthors=Gerald T. Lins, Kathryn L. Hoenig, Patricia S. Rube |year=2011 |publisher=Thomson West |location= |isbn= |page= |pages=}}</ref> They are responsible for the trading within [[managed futures account]]s. CTAs are generally regulated by the United States federal government through registration with the [[Commodity Futures Trading Commission]] (CFTC) and membership of the [[National Futures Association]] (NFA).
A '''managed futures account''' ('''MFA''') or '''managed futures fund''' is a type of [[alternative investment]] in which trading in the [[Futures exchange|futures markets]] is managed by another person or entity, rather than the fund's owner.<ref>{{cite web |url=http://www.cftc.gov/ConsumerProtection/EducationCenter/CFTCGlossary/glossary_co#controlledaccount |title=CFTC Glossary: Controlled account |work=Commodity Futures Trading Commission |accessdate=16 May 2012}}</ref> Managed futures accounts include, but are not limited to, [[commodity pool]]s. These funds are operated by [[commodity trading advisor]]s (CTAs) or [[Commodity Pool Operator|commodity pool operators]] (CPOs), who are generally regulated in the United States by the [[Commodity Futures Trading Commission]] and the [[National Futures Association]]. {{As of|2011|12}}, the assets under management held by managed futures accounts totaled $314 billion.<ref>{{cite web |url=http://www.barclayhedge.com/research/indices/cta/Money_Under_Management.html |title=CTA Industry - Assets Under Management |date=2011 |work=Barclay Hedge |accessdate=16 May 2012}}</ref>


==Characteristics==
==Characteristics==
⚫
===Trading activities===
Managed futures accounts are operated on behalf of an individual by professional money managers such as [[Commodity trading advisor|CTAs]] or [[Commodity Pool Operator|CPOs]], trading in [[Futures contract|futures]] or other derivative securities.<ref name=Burghardt>{{cite book |title=Managed Futures for Institutional Investors: Analysis and Portfolio Construction |last1=Burghardt |first1=Galen |last2=Walls |first2=Brian |year=2011 |publisher=Bloomberg Press |isbn=1576603741 |pages=1-2 |url=http://books.google.com/books?id=RAnzTjfnbcIC&pg=PA2&dq=%22managed+futures+fund%22&hl=en&sa=X&ei=ouSzT7GIEsjs2AXfl6HpCA&ved=0CHsQ6AEwCA#v=snippet&q=%22managed%20futures%20fund%22&f=false |accessdate=16 May 2012}}</ref> The funds can take both [[Long (finance)|long]] and [[Short (finance)|short]] positions in [[futures contract]]s and [[option (finance)|options]] on futures contracts in the global commodity, interest rate, equity, and currency markets.<ref name=Melin>{{cite book |title=High-Performance Managed Futures: The New Way to Diversify Your Portfolio |last=Melin |first=Mark H. |year=2010 |publisher=Wiley |isbn=0470637935 |url=http://books.google.com/books?id=I1dmoO1il14C&pg=PT106&dq=%22managed+futures+fund%22&hl=en&sa=X&ei=ouSzT7GIEsjs2AXfl6HpCA&ved=0CE4Q6AEwAA#v=onepage&q=%22managed%20futures%20account%22&f=false |accessdate=16 May 2012}}</ref>
A CTA generally acts as an [[asset manager]], following a set of investment strategies utilizing [[futures contract]]s and [[option (finance)|options]] on futures contracts on a wide variety of physical goods such as agricultural products, forest products, metals, and energy, plus [[Derivative (finance)|derivative contracts]] on financial instruments such as indices, bonds, and currencies.<ref name="Chapman 2008">{{cite book |title=Encyclopedia of Alternative Investments |last=Gregoriou |first=Greg N. |authorlink= |coauthors= |year=2008 |publisher=Chapman and Hall/CRC |location= |isbn=1420064886 |page=93 |pages= |url=http://books.google.com/books?id=6VyCPLTTilQC&lpg=PA93&dq=history%20of%20%22commodity%20trading%20advisor%22&pg=PA93#v=onepage&q=history%20of%20%22commodity%20trading%20advisor%22&f=false |accessdate=15 May 2012}}</ref> The trading programs employed by CTAs can be characterized by their market strategy, whether [[trend following]] or [[market neutral]], and the market segment, such as financial, agricultural or currency.<ref name="Chapman 2008"/>


There are two major styles of investment employed by CTAs: [[Technical analysis|technical]] and fundamental. Technical traders often employ partially automated systems, such as [[computer software]] programs, to follow [[price trends]], perform [[Quantitative analysis (finance)|quantitative analysis]], and execute trades. Successful [[trend following]], or using technical analysis techniques to capture swings in markets may drive a CTA's performance and activity to a large degree. In 2010, Dr. Galen Burghardt, adjunct professor at the University of Chicago's [[Booth School of Business]], found a correlation of 0.97 between a subset of trend following CTAs and a broader CTA index from the period 2000-2009, indicating that speculative technical trend following had been dominant within the CTA community.<ref>{{cite web |url=http://www.opalesque.tv/youtube/Galen_Burghardt/1 |title=Dr. Galen Burghardt: Measuring the impact of trend following in the CTA space |last1= |first1= |last2= |first2= |date=13 December 2010 |work=Opalesque.TV |accessdate=15 May 2012}}</ref> Fundamental traders attempt to [[forecasting|forecast]] prices by analyzing [[supply and demand]] factors, amongst other market information, in their attempt to realize profits. Other non-trend following CTAs include [[Short-term trading|short-term traders]], [[Options spread|spread trading]] and individual market specialists.<ref>{{cite news |title=Constructing a managed futures portfolio |author= |url=http://www.managedfuturestodaymag.com/constructing-managed-futures-portfolio |work=Managed Futures Today |date=November 2010 |accessdate=16 May 2012}}</ref>
⚫
===Trading strategies===
Managed futures accounts may be traded using any number of strategies, the most common of which is [[trend following]]. Trend following involves buying in markets that are trending higher and selling short in markets that are trending lower. Variations in trend following managers include duration of trend captured (short term, medium term, long term) as well as definition of trend (i.e. what is considered a new high or new low) and the money management/risk management techniques. Other strategies employed by managed futures managers include discretionary strategies, fundamental strategies, option writing, pattern recognition, and arbitrage strategies, among others.<ref name=Lhabitant>{{cite book |title=Handbook of Hedge Funds |last=Lhabitant |first=François-Serge |year=2007 |publisher=Wiley, John & Sons, Incorporated |isbn=0470026634 |pages= |url=http://books.google.com/books?id=zVubHUSOxpoC&pg=SA16-PA2&dq=%22managed+futures+fund%22&hl=en&sa=X&ei=ouSzT7GIEsjs2AXfl6HpCA&ved=0CFgQ6AEwAg#v=onepage&q=%22managed%20futures%20fund%22&f=false}}</ref> However, trend following and variations of trend following are the predominant strategy.<ref>{{cite news |title=Constructing a managed futures portfolio |author= |url=http://www.managedfuturestodaymag.com/constructing-managed-futures-portfolio |work=Managed Futures Today |date=November 2010 |accessdate=16 May 2012}}</ref>


===Notional funding===
===Compensation===
A CTA is often compensated through management fees calculated as a percentage of equity in the fund and profit incentive fees calculated as a percentage of new trading profits. Usually no incentive fees are charged if the CTA does not generate a profit exceeding a [[minimum acceptable rate of return|hurdle rate]] or high water mark.<ref>{{cite web |url=http://business.highbeam.com/industry-reports/finance/investors-not-elsewhere-classified |title=Investors NEC SIC 6799 |work=Highbeam Business |publisher=Gale Group |accessdate=16 May 2012}}</ref><ref>{{cite web |url=http://www.hedgeworld.com/research/download/Study_of_Survival.pdf |title=A Study of Survival: Commodity Trading Advisors, 1988-1996 |last1=Spurgin |first1=Richard |last2=Schneeweis |first2=Thomas |date=8 February 1998 |work=Hedgeworld |publisher=University of Massachusetts |accessdate=5 June 2012}}</ref>
In many managed futures accounts the dollar amount traded is equal to the amount provided by the investor. However, managed futures also allows investors to leverage their investment with the use of notional funding, which is the difference between the amount provided by the investor (funding level) and the mutually agreed upon amount to be traded (trading level).<ref>{{cite book |title=Managed Futures for Institutional Investors: Analysis and Portfolio Construction |last1=Burghardt |first1=Galen |last2=Walls |first2=Brian |year=2011 |publisher=Bloomberg Press |isbn=1576603741 |pages=37-8 |url=http://books.google.com/books?id=RAnzTjfnbcIC&pg=PA2&dq=%22managed+futures+fund%22&hl=en&sa=X&ei=ouSzT7GIEsjs2AXfl6HpCA&ved=0CHsQ6AEwCA#v=snippet&q=%22managed%20futures%20fund%22&f=false |accessdate=16 May 2012}}</ref> Notional funding allows an investor to put up only a portion of the minimum investment for a managed futures account, usually 25% to 75% of the minimum. For example, to meet a $200,000 minimum for a CTA that allows 50% notional funding, an investor would only need to provide $100,000 to the CTA. The investment would be traded as if it were $200,000, which would result in double the earnings or losses, as well as double the management fee relative to the actual amount invested. As a result, notional funding can add significant risk to managed futures accounts and investors who wish to use such funding are required to sign disclosures to state that they understand the risk involved.<ref>{{cite book |title=High-Performance Managed Futures: The New Way to Diversify Your Portfolio |last=Melin |first=Mark H. |year=2010 |publisher=Wiley |isbn=0470637935 |pages=203-4 |url=http://books.google.com/books?id=I1dmoO1il14C&pg=PT106&dq=%22managed+futures+fund%22&hl=en&sa=X&ei=ouSzT7GIEsjs2AXfl6HpCA&ved=0CE4Q6AEwAA#v=onepage&q=%22managed%20futures%20account%22&f=false |accessdate=16 May 2012}}</ref>

===Performance===
[[File:Managed futures 1980 to 2008.jpg|thumb|Managed Futures performance history from 1980 to 2008]]

Managed futures have historically displayed very low [[correlation]]s to traditional investments, such as stocks and bonds. Following [[modern portfolio theory]], this lack of correlation builds the robustness of the portfolio, reducing portfolio [[volatility]] and risk, without significant negative impacts on return. This lack of correlation stems from the fact that markets tend to "trend" the best during more volatile periods, and periods in which markets decline tend to be the most volatile.<ref name=Melin/> From 1980 to 2010, the compound average annual return for managed futures was 14.52%, as measured by the CASAM CISDM CTA Equal Weighted Index, while the return for U.S. stocks was 7.04% (based on the [[S&P 500]] total return index).<ref>{{cite news |title=Under the investment radar |last=Fischer |first=Michael S. |url=http://www.fa-mag.com/component/content/article/38-features/6015.html?Itemid=178 |work=Private Wealth |publisher=Charter Financial Publishing Network Inc |date=September 2010 |accessdate=16 May 2012}}</ref>


==History==
==History==
In the United States, trading of futures contracts for agricultural commodities dates back to at least the 1850s.<ref name=Stassen>{{cite journal |last1=Stassen |first1=John H. |year=1982 |title=The Commodity Exchange Act in Perspective a Short and Not-So-Reverent History of Futures Trading Legislation in the United States |journal=Washington and Lee Law Review |volume=39 |issue=3 |pages=825-843 |publisher=Washington & Lee University School of Law |doi= |url=http://scholarlycommons.law.wlu.edu/cgi/viewcontent.cgi?article=2759&context=wlulr&sei-redir=1 |accessdate=29 May 2012}}</ref> In the 1920s, the federal government proposed the first regulation aimed at futures trading, and passed the [[Grain Futures Act]] in 1922. Following amendments in 1936, this law was replaced by the [[Commodity Exchange Act]].<ref name="CFTC History">{{cite web |url=http://www.cftc.gov/About/HistoryoftheCFTC/index.htm |title=History of the CFTC |work=Commodity Futures Trading Commission |accessdate=15 May 2012}}</ref><ref name=Stassen/> The [[Commodity Futures Trading Commission]] (CFTC) was established in 1974, under the [[Commodity Futures Trading Commission Act of 1974|Commodity Futures Trading Commission Act]].<ref name="CFTC History"/> The regulation led to the recognition of a new group of money managers including CTAs. At that time, the funds they operated became known as managed futures. In the late 1970s, the relatively new managed futures funds began to gain acceptance.<ref name=Lhabitant/> Although the majority of trading was still in futures contracts for agricultural commodities,<ref name="CFTC History"/> exchanges started to introduce futures contracts on other assets, including currencies and bonds.<ref name=Lhabitant/> In the 1980s, the futures industry developed significantly<ref name=Burghardt/> following the introduction of non-commodity related futures and by 2004 managed futures had become a $130 billion dollar industry.<ref name=Lhabitant/>
In the United States, trading of futures contracts for agricultural commodities dates back to at least the 1850s.<ref name=Stassen>{{cite journal |last1=Stassen |first1=John H. |year=1982 |title=The Commodity Exchange Act in Perspective a Short and Not-So-Reverent History of Futures Trading Legislation in the United States |journal=Washington and Lee Law Review |volume=39 |issue=3 |pages=825-843 |publisher=Washington & Lee University School of Law |doi= |url=http://scholarlycommons.law.wlu.edu/cgi/viewcontent.cgi?article=2759&context=wlulr&sei-redir=1 |accessdate=29 May 2012}}</ref> The first Federal regulation aimed at futures trading was proposed in the early 1920s, leading to the passage of the [[Grain Futures Act]] in 1922. In 1936, this law was replaced by an amended version named the [[Commodity Exchange Act]].<ref name="CFTC History">{{cite web |url=http://www.cftc.gov/About/HistoryoftheCFTC/index.htm |title=History of the CFTC |work=Commodity Futures Trading Commission |accessdate=15 May 2012}}</ref><ref name=Stassen/> The "commodity trading advisor" was first recognized in legislation in 1974, when the [[Commodity Futures Trading Commission]] (CFTC) was established under the Commodity Futures Trading Commission Act.<ref name="CFTC History"/><ref name=Lhabitant>{{cite book |title=Handbook of Hedge Funds |last=Lhabitant |first=François-Serge |year=2007 |publisher=Wiley, John & Sons, Incorporated |isbn=0470026634 |pages= |url=http://books.google.com/books?id=zVubHUSOxpoC&pg=SA16-PA2&dq=%22managed+futures+fund%22&hl=en&sa=X&ei=ouSzT7GIEsjs2AXfl6HpCA&ved=0CFgQ6AEwAg#v=onepage&q=%22managed%20futures%20fund%22&f=false}}</ref> The name CTA was adopted since the advisors originally operated predominantly within the commodities markets. Later, trading expanded significantly following the introduction of derivatives on other products including financial instruments.<ref name="CFTC History"/><ref name="Chapman 2008"/>


==Regulation==
==Regulation==
===Historical regulation===
Managed futures accounts are regulated by the U.S. federal government, through the CTAs and CPOs advising the funds. Most all of these entities are required to register with the [[Commodity Futures Trading Commission]] and the [[National Futures Association]] and follow their regulations on disclosure and reporting.<ref name=Lhabitant/>
In 1979, the CFTC adopted the first comprehensive regulation for commodity trading advisors, which was later strengthened by additional rules in 1983 and 1995. The additional rules in 1983 increased the CFTC's oversight of such advisors and authorized the [[National Futures Association]] (NFA) to carry out processing of registration for entities including CTAs.<ref>{{cite web |url=http://www.cftc.gov/About/HistoryoftheCFTC/history_1970s |title=CFTC History 1970s |work=Commodity Futures Trading Commission |accessdate=15 May 2012}}</ref><ref>{{cite web |url=http://www.cftc.gov/About/HistoryoftheCFTC/history_1980s |title=CFTC History 1980s |work=Commodity Futures Trading Commission |accessdate=15 May 2012}}</ref> Those adopted in 1995 aimed to increase disclosure by CTAs leading to increased knowledge and understanding for investors.<ref>{{cite web |url=http://www.cftc.gov/About/HistoryoftheCFTC/history_1990s |title=CFTC History 1990s |work=Commodity Futures Trading Commission |accessdate=15 May 2012}}</ref>

===Current regulation===
Under the [[Commodity Exchange Act]], CTAs must register with and conform to the regulations of the CFTC, including providing records and reports, unless they meet the Commission's criteria for exemption.<ref name=Register>{{cite web |url=http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/federalregister020912b.pdf |title=Commodity Pool Operators and Commodity Trading Advisors: Amendments to Compliance Obligations |work=Commodity Futures Trading Commission |accessdate=14 May 2012}}</ref><ref name=Lemke/> Registered CTAs must also become members of the NFA if they manage funds or provide advice to members of the public.<ref name=NFA>{{cite web |url=http://www.nfa.futures.org/NFA-registration/cta/index.HTML |title=Commodity Trading Advisor |work=National Futures Association |accessdate=14 May 2012}}</ref>

Under the Commodity Exchange Act qualifying individuals may be exempted from CTA registration with the CFTC, including if their primary business is not as a CTA, they are registered with the [[Securities and Exchange Commission]] as an investment advisor, and if they have not provided trading advice to more than 15 persons. If an individual is exempt from registration, they must still file with the NFA.<ref>{{cite web |url=http://www.cftc.gov/IndustryOversight/Intermediaries/CPOs/cpoctaexemptionsexclusions |title=Commodity Pool Operator and Commodity Trading Advisor Exemptions and Exclusions |work=Commodity Futures Trading Commission |accessdate=15 May 2012}}</ref> A CTA is exempt from registration with the NFA if they have provided commodity trading advice to fewer than 15 people and do not generally use the title commodity trading advisor, or if they provide advice only through publications, a computerized system or seminars.<ref name=NFA/>


===Changes following Dodd-Frank===
The 2010 enactment of the [[Dodd-Frank Wall Street Reform and Consumer Protection Act]] led to increased regulation of the managed futures industry. On January 26, 2011, the CFTC made additions and amendments to the regulation of CPOs and CTAs, including two new forms of data collection. The CFTC also introduced regulation to require greater reporting of data and amend its registration requirements.<ref>{{cite web |url=http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/federalregister020912b.pdf |title=Commodity Pool Operators and Commodity Trading Advisors: Amendments to Compliance Obligations |date=26 January 2011 |work=Commodity Futures Trading Commission |accessdate=14 May 2012}}</ref> Under the new amended registration requirement, funds that use [[Swap (finance)|swaps]] or other commodity interests may be defined as commodity pools and as such their operators must register with the CFTC, where previously they did not.<ref>{{cite web |url=http://www.sutherland.com/files/upload/TheCFTCsFinalEntityRulesandTheirImplicationsforHedgeFundsandOtherPrivateFunds.pdf#page=1 |title=The CFTC’s final entity rules and their implications for hedge funds and other private funds |date=10 May 2012 |work=Sutherland |publisher=Sutherland Asbill & Brennan LLP |accessdate=4 June 2012}}</ref> On 17 April 2012, the [[United States Chamber of Commerce]] and the [[Investment Company Institute]] filed a lawsuit against the CFTC, aiming to overturn this change to rules that would require the operators of mutual funds investing in commodities to be registered.<ref>{{cite news |title=CFTC Sued By Fund Industry To Overturn Registration Rule |last1=Dolmetsch |first1= Chris |last2=Schmidt |first2=Robert |url=http://www.bloomberg.com/news/2012-04-17/cftc-sued-over-commodity-pool-operators-rule-for-advisers-1-.html |work=Bloomberg |date=17 April 2012 |accessdate=5 June 2012}}</ref>
On January 26, 2011, following the 2010 enactment of the [[Dodd-Frank Wall Street Reform and Consumer Protection Act]], the CFTC made additions and amendments to the regulation of CTAs, including two new forms of data collection. The CFTC also increased disclosure requirements and amended the registration criteria.<ref name=Register/> Due to these changes, advisors managing funds that use [[Swap (finance)|swaps]] or other commodity interests may be defined as CTAs, subject to registration with the CFTC.<ref>{{cite web |url=http://www.sutherland.com/files/upload/TheCFTCsFinalEntityRulesandTheirImplicationsforHedgeFundsandOtherPrivateFunds.pdf#page=1 |title=The CFTC’s final entity rules and their implications for hedge funds and other private funds |date=10 May 2012 |work=Sutherland |publisher=Sutherland Asbill & Brennan LLP |accessdate=4 June 2012}}</ref> On 17 April 2012, the [[United States Chamber of Commerce]] and the [[Investment Company Institute]] filed a lawsuit against the CFTC, aiming to overturn this change to rules that would require the operators of mutual funds investing in commodities to be registered.<ref>{{cite news |title=CFTC Sued By Fund Industry To Overturn Registration Rule |last1=Dolmetsch |first1= Chris |last2=Schmidt |first2=Robert |url=http://www.bloomberg.com/news/2012-04-17/cftc-sued-over-commodity-pool-operators-rule-for-advisers-1-.html |work=Bloomberg |date=17 April 2012 |accessdate=5 June 2012}}</ref>


== References ==
==References==
{{reflist|2}}
{{Reflist|2}}


== External links ==
==External links==
<!-- Wikipedia is not a link farm. Before adding a link, read [[Wikipedia:External links]] to see if it complies]] -->
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* [http://www.cftc.gov Commodity Futures Trading Commission web site]
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* [http://www.nfa.futures.org National Futures Association web site]


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*[http://www.nfa.futures.org/index.asp National Futures Association]
[[cs:Managed Futures]]
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*[http://www.cftc.gov/index.htm U.S. Commodity Futures Trading Commission]
[[de:Managed Futures]]
[[fr:Managed Futures]]


{{Hedge funds}}
[[:Category:Funds]]
{{DEFAULTSORT:Commodity Trading Advisor}}
[[:Category:Commodities market]]
[[:Category:Commodities market]]
[[:Category:Business and financial operations occupations]]

Revision as of 16:53, 5 June 2012

Financial market participants
Organisations
Terms

A Commodity Trading Advisor (CTA) is an individual or organization who is retained by a fund or individual client to provide advice and services related to trading in futures contracts and commodity options.[1] They are responsible for the trading within managed futures accounts. CTAs are generally regulated by the United States federal government through registration with the Commodity Futures Trading Commission (CFTC) and membership of the National Futures Association (NFA).

Characteristics

Trading activities

A CTA generally acts as an asset manager, following a set of investment strategies utilizing futures contracts and options on futures contracts on a wide variety of physical goods such as agricultural products, forest products, metals, and energy, plus derivative contracts on financial instruments such as indices, bonds, and currencies.[2] The trading programs employed by CTAs can be characterized by their market strategy, whether trend following or market neutral, and the market segment, such as financial, agricultural or currency.[2]

There are two major styles of investment employed by CTAs: technical and fundamental. Technical traders often employ partially automated systems, such as computer software programs, to follow price trends, perform quantitative analysis, and execute trades. Successful trend following, or using technical analysis techniques to capture swings in markets may drive a CTA's performance and activity to a large degree. In 2010, Dr. Galen Burghardt, adjunct professor at the University of Chicago's Booth School of Business, found a correlation of 0.97 between a subset of trend following CTAs and a broader CTA index from the period 2000-2009, indicating that speculative technical trend following had been dominant within the CTA community.[3] Fundamental traders attempt to forecast prices by analyzing supply and demand factors, amongst other market information, in their attempt to realize profits. Other non-trend following CTAs include short-term traders, spread trading and individual market specialists.[4]

Compensation

A CTA is often compensated through management fees calculated as a percentage of equity in the fund and profit incentive fees calculated as a percentage of new trading profits. Usually no incentive fees are charged if the CTA does not generate a profit exceeding a hurdle rate or high water mark.[5][6]

History

In the United States, trading of futures contracts for agricultural commodities dates back to at least the 1850s.[7] The first Federal regulation aimed at futures trading was proposed in the early 1920s, leading to the passage of the Grain Futures Act in 1922. In 1936, this law was replaced by an amended version named the Commodity Exchange Act.[8][7] The "commodity trading advisor" was first recognized in legislation in 1974, when the Commodity Futures Trading Commission (CFTC) was established under the Commodity Futures Trading Commission Act.[8][9] The name CTA was adopted since the advisors originally operated predominantly within the commodities markets. Later, trading expanded significantly following the introduction of derivatives on other products including financial instruments.[8][2]

Regulation

Historical regulation

In 1979, the CFTC adopted the first comprehensive regulation for commodity trading advisors, which was later strengthened by additional rules in 1983 and 1995. The additional rules in 1983 increased the CFTC's oversight of such advisors and authorized the National Futures Association (NFA) to carry out processing of registration for entities including CTAs.[10][11] Those adopted in 1995 aimed to increase disclosure by CTAs leading to increased knowledge and understanding for investors.[12]

Current regulation

Under the Commodity Exchange Act, CTAs must register with and conform to the regulations of the CFTC, including providing records and reports, unless they meet the Commission's criteria for exemption.[13][1] Registered CTAs must also become members of the NFA if they manage funds or provide advice to members of the public.[14]

Under the Commodity Exchange Act qualifying individuals may be exempted from CTA registration with the CFTC, including if their primary business is not as a CTA, they are registered with the Securities and Exchange Commission as an investment advisor, and if they have not provided trading advice to more than 15 persons. If an individual is exempt from registration, they must still file with the NFA.[15] A CTA is exempt from registration with the NFA if they have provided commodity trading advice to fewer than 15 people and do not generally use the title commodity trading advisor, or if they provide advice only through publications, a computerized system or seminars.[14]

Changes following Dodd-Frank

On January 26, 2011, following the 2010 enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFTC made additions and amendments to the regulation of CTAs, including two new forms of data collection. The CFTC also increased disclosure requirements and amended the registration criteria.[13] Due to these changes, advisors managing funds that use swaps or other commodity interests may be defined as CTAs, subject to registration with the CFTC.[16] On 17 April 2012, the United States Chamber of Commerce and the Investment Company Institute filed a lawsuit against the CFTC, aiming to overturn this change to rules that would require the operators of mutual funds investing in commodities to be registered.[17]

References

  1. ^ a b Lemke, Thomas P. (2011). Hedge Funds and Other Private Funds: Regulation and Compliance 2011-2012 Edition. Thomson West. {{cite book}}: Unknown parameter |coauthors= ignored (|author= suggested) (help)
  2. ^ a b c Gregoriou, Greg N. (2008). Encyclopedia of Alternative Investments. Chapman and Hall/CRC. p. 93. ISBN 1420064886. Retrieved 15 May 2012. {{cite book}}: Cite has empty unknown parameter: |coauthors= (help)
  3. ^ "Dr. Galen Burghardt: Measuring the impact of trend following in the CTA space". Opalesque.TV. 13 December 2010. Retrieved 15 May 2012.
  4. ^ "Constructing a managed futures portfolio". Managed Futures Today. November 2010. Retrieved 16 May 2012.
  5. ^ "Investors NEC SIC 6799". Highbeam Business. Gale Group. Retrieved 16 May 2012.
  6. ^ Spurgin, Richard; Schneeweis, Thomas (8 February 1998). "A Study of Survival: Commodity Trading Advisors, 1988-1996" (PDF). Hedgeworld. University of Massachusetts. Retrieved 5 June 2012.
  7. ^ a b Stassen, John H. (1982). "The Commodity Exchange Act in Perspective a Short and Not-So-Reverent History of Futures Trading Legislation in the United States". Washington and Lee Law Review. 39 (3). Washington & Lee University School of Law: 825–843. Retrieved 29 May 2012.
  8. ^ a b c "History of the CFTC". Commodity Futures Trading Commission. Retrieved 15 May 2012.
  9. ^ Lhabitant, François-Serge (2007). Handbook of Hedge Funds. Wiley, John & Sons, Incorporated. ISBN 0470026634.
  10. ^ "CFTC History 1970s". Commodity Futures Trading Commission. Retrieved 15 May 2012.
  11. ^ "CFTC History 1980s". Commodity Futures Trading Commission. Retrieved 15 May 2012.
  12. ^ "CFTC History 1990s". Commodity Futures Trading Commission. Retrieved 15 May 2012.
  13. ^ a b "Commodity Pool Operators and Commodity Trading Advisors: Amendments to Compliance Obligations" (PDF). Commodity Futures Trading Commission. Retrieved 14 May 2012.
  14. ^ a b "Commodity Trading Advisor". National Futures Association. Retrieved 14 May 2012.
  15. ^ "Commodity Pool Operator and Commodity Trading Advisor Exemptions and Exclusions". Commodity Futures Trading Commission. Retrieved 15 May 2012.
  16. ^ "The CFTC's final entity rules and their implications for hedge funds and other private funds" (PDF). Sutherland. Sutherland Asbill & Brennan LLP. 10 May 2012. Retrieved 4 June 2012.
  17. ^ Dolmetsch, Chris; Schmidt, Robert (17 April 2012). "CFTC Sued By Fund Industry To Overturn Registration Rule". Bloomberg. Retrieved 5 June 2012.

External links

Category:Commodities market Category:Business and financial operations occupations

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