- 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
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MarketsThere are currently 50 physical and virtual commodity markets worldwide where almost 100 primary commodities trade through the exchange of ownership rights.
MarketsDark pools of liquidity allow big investors to trade away from the public eye. They limit market impact but may leave small investors in the cold.
InvestingLearn what you need to know about investment advisory fees and contracts to pass the Series 66 exam.
MarketsYou might hear 'liquid commodities' and think of an auction, but they're actually a high-volume, fast paced financial product suitable for day traders.
ETFs & Mutual FundsNearby trendlines and resistance from major moving averages suggest that the broad commodities market is headed lower from here.
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ETFs & Mutual FundsThe charts of these three exchange traded funds suggest that commodities are stuck in a downtrend and it doesn't look like it will reverse any time soon.