Series 3 - National Commodities Futures

AAA

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

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