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Investopedia explains 'Commodity Trading Advisor - CTA'
Obtaining the CTA registration requires the applicant to pass certain proficiency requirements, most commonly the Series 3 National Commodity Futures Exam. However, depending on one's role within a firm, alternative tests may be used as proof of proficiency. Generally, CTA registration is required for both principals of a firm, as well as all employees dealing with taking orders from, or giving advice to, the public.
Registration as a CTA is required to give advice regarding all forms of commodity investments, including futures contracts, forwards, options and swaps. Investments in commodities often involve the use of significant leverage and as such require a higher level of expertise to trade properly, while avoiding the potential for large losses.
The regulations for commodity trading advisors dates back to the late 1970s, as commodity market investing became more accessible to retail investors. The Commodity Futures Trading Commission (CFTC) has gradually expanded the requirements for CTA registration over time.
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