Regulations - Commodity Pool Operators And Commodity Trading Advisors

Commodity Pool Operators And Commodity Trading Advisors

Disclosure Documents
CPOs and CTAs must disclose to their prospective customers:

  • all upfront fees,
  • performance records,
  • trading strategy,
  • five-year business background of principals, and
  • any conflicts of interest.

Additionally, CPOs and CTAs must offer the same sort of risk disclosure statements that must precede taking on any clients new to futures trading.

Records to be maintained
In addition to the usual financial records, CPOs and CTAs must also maintain a written record of any so-called "alternative execution." These fall into two categories:

  • A "block trade" is a large transaction that is negotiated away from the exchange, but executed on the exchange's floor. The CFTC retains the right to regulate block trades on a case-by-case basis.
  • A "bunched order" is an order entered on behalf of multiple customers.

CPOs and CTAs are governed by the same public communication regulations contained in Rule 2-29, discussed earlier in the chapter. Review that section now and frequently.

Single Stock Futures Regulation


Related Articles
  1. Options & Futures

    Your Futures Are In Good Hands With CTAs

    Profit from up, down and sideways markets with commodity trading advisors.
  2. Options & Futures

    An Introduction To Managed Futures

    Their inverse correlation with stocks and bonds make these alternative investments worth getting to know.
  3. Investing Basics

    How To Invest In Commodities

    Find out which futures, options or funds will be your perfect commodity portfolio fit.
  4. Active Trading

    9 Misconceptions About Managed Futures

    Managed futures are not all they're worked up to be. Learn why they are not a good option for investors.
  5. Mutual Funds & ETFs

    Commodity Funds 101

    These funds make investing in gold, oil or grain an easier prospect.
  6. Investing Basics

    The Role Of Speculators In The Commodity Market

    Contrary to popular belief, speculators are important for the market. Find out exactly what they do.
  7. Active Trading

    Should You Be Afraid Of Dark Pool Liquidity?

    Don't fear the deep end. Dark pool liquidity can help drive down stock cost for everyday investors.
  8. Options & Futures

    All About Liquid Commodities

    You might hear 'liquid commodities' and think of an auction, but they're actually a high-volume, fast paced financial product suitable for day traders.
  9. Options & Futures

    Hotshots Needed For Commodity Trading Advisor Positions

    If you can multi-task and you enjoy a good challenge, this lucrative career could be a perfect fit.
  10. Options & Futures

    An Overview Of Commodities Trading

    Commodities markets, both historically and in modern times, have had tremendous economic impact on nations and people. Investing in commodities can quickly degenerate into gambling or speculation ...
RELATED TERMS
  1. Commodity Pool Operator - CPO

    Persons or limited partnerships responsible for investing a commodity ...
  2. Exempt Commodity

    Any commodity other than an excluded or agricultural commodity. ...
  3. Commodity ETF

    Exchange-traded funds that invest in physical commodities such ...
  4. Exchange Distribution

    A type of trade made on the floor of a securities exchange in ...
  5. Brochure Rule

    Under the Investment Advisor's Act of 1940, the Brochure Rule ...
  6. Commodity Pairs

    The three forex pairs which include currencies from countries ...
RELATED FAQS
  1. Can commodities also be investments?

    Learn about the commodities trade and several different ways investors may participate. Find out about some of the advantages ... Read Answer >>
  2. How can I invest online in oil, gold and other commodities?

  3. How do financial advisors execute trades?

    Understand how financial advisors normally execute an investor's trades. Learn about the different type of markets and exchanges ... Read Answer >>
  4. Which of the following would be considered a short hedge ...

    The correct answer is a) Long the commodity and short the futures Read Answer >>
  5. How can electricity be traded as a commodity by an individual investor?

    Learn the characteristics unique to electricity trading as a commodity and how investors can trade electricity futures on ... Read Answer >>
  6. What are tradable commodities?

    Understand what tradable commodities are as well as the rules and risks governing how they are sold and traded in the marketplace. Read Answer >>
Hot Definitions
  1. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  2. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  3. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  4. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  5. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  6. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
Trading Center