Tag Archives: managed futures

CTA Expo Program in New York 2012

The CTA Expo is probably the best series of events for CTAs in the United States (and now in London) and the New York event is coming up soon. The managed futures industry will be in New York on April 18th for the NIBA Conference event and on April 19th for the CTA Expo. Both events will be at the NYMEX building. As we have for the last few years, Cole-Frieman & Mallon will be a sponsor of the NIBA event and will be attending the expo on the next day. We look forward to seeing everybody there.

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April 18, 2012

4:30 – 6:00 Joint NIBA/CTAEXPO Cocktail Party, Sponsored by Telvent DTN

April 19, 2012

8:30 – 9:30 Continental Breakfast

Sponsored by DMAXX

9:15 – 9:30 Welcoming Remarks

Bucky Isaacson and Frank Pusateri

9:30 – 10:00 An Insider’s View of Marketing

Elaine Llyod | Axion Services Group

Sponsored by BNY Mellon

10:00 – 10:30 How Family Offices Select Managers

Audie Apple | Bessemer Trust

Sponsored by Horizon Cash Management

10:30 – 11:00 Coffee Break

Sponsored by Credit Suisse

11:00 – 11:30 Marketing in Latin America

Todd Scanlon | Bank of America Merrill Lynch

11:30 – 12:15 KEYNOTE SPEAKER

Bob Swarup | PIC

Sponsored by Trading Technologies

12:15 – 1:15 Lunch

Sponsored by ICE

1:15 – 2:00 KEYNOTE SPEAKER

Chuck Johnson | Tano Capital

Sponsored by Eurex

2:00 – 2:30 Marketing in Asia

Ilsoo Moon | Quark Capital

Sponsored by Dorman Trading

2:30 – 3:00 Compliance Issues in Today’s Regulatory Environment

Kate Dressel | Strategic Compliance Solutions LLC

David Matteson | Drinker Biddle & Reath LLP

Sponsored by Symphono

3:00 – 3:30 Coffee Break

Sponsored by Patsystems

3:30 – 4:00 Press Panel

Ron Weiner | RDM Inc.

Sandra Smith | FOX Business Network

Moderator: John Conolly | CME Group

Sponsored by Gemini Fund Services

4:00 – 4:30 The Psychology of Successful Trading

Denise Schull | Trader Psyches

Sponsored by Investor Analytics

4:30 – 6:00 Closing Cocktail Party

Sponsored by NYSE Liffe US and NYSE Liffe

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Cole-Frieman & Mallon LLP provides legal and compliance support to CTAs and CPOs. Please feel free to contact us directly or reach out to Bart Mallon at 415-868-5345.

 

Zero-Sum Game

Story of the CME & CBOT Merger

Just a quick note to say I recently picked up the book Zero-Sum Game by Erika S. Olson.  Olson is, at the time the story begins, a newly hired managing director of marketing for the Chicago Board of Trade and she chronicled her experiences during the merger of the CBOT and the Chicago Mercantile Exchange in 2007.  In addition to detailing her experiences, she provides background information on many of the major players in the negotions and on events that transpired in the nine months following the merger announcement.

For me some of the more interesting parts of the story include:

  • Jeff Sprecher’s moves to get the ICE involved in the merger/acquisition discussion [note: some of the marketing tactics remind me of the tactics Marc Benioff used against Siebel, as described in Behind the Cloud]
  • The story of the CBOT Class B Shareholders and their CBOE ERPs (would have actually liked to read more about this)
  • Story of Caledonia and ownership of memberships at a number of exchanges; their involvement near the proxy vote
  • Discussion of John Lothian's commentary throughout merger negotiations

Of course, with any narrative that involves someone from outside the futures industry, there are the funny anecdotes of being introduced to some of Chicago’s more colorful characters – the traders.  (For an up close look at some of these personalities, Floored is a great movie…)

Overall I thought it was a good, quick read that shed a bit of light into what was going on during the merger.  I thought Olson had a great voice and told the story well, but I was left wanting more detail and background into certain situations.

For more on the book, see the Futures Magazine review.

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Cole-Frieman & Mallon LLP provides

full legal services to the managed futures industry.  Bart Mallon can be reached directly at 415-868-5345.

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CTA and CPO Registration and Compliance Guide

Practical guidance for CTA and CPO firms

Commodity Trading Advisors (CTAs) and Commodity Pool Operators (CPOs) have been contacting me with greater regularity and we have decided to provide those firms with more detailed information on their registration and compliance requirements. Over the course of the next few weeks we will be continually updating this page with more legal and business guidance for CTAs and CPOs. Specifically, we will be providing information on the following topics:

CTA and CPO Registration – this article discusses the how-to’s of registration with the CFTC. The article details the general requirements for firms, principals, and associated persons. Included in this discussion is information on CTA/CPO exam requirements and an overview of the registration process through the NFA’s electronic registration system.

CTA and CPO Registration Exemptions – while the Commodities Exchange Act will generally require CTA and CPO firms to register with the CFTC, there are some important exemptions from the registration provisions. Review this article to see if your firm might be able to claim an exemption from the registration provisions.

CTA and CPO Compliance Overview – CTAs and CPOs are subject to a number of laws, regulations and rules. Not only must CTAs and CPOs follow CFTC laws and regulations, but as Members of the NFA, these groups must also follow all of the rules developed by the NFA. We will be discussing compliance best practices, major examination issues, major deadlines and the CTA/CPO compliance manual. Being prepared for an NFA examination is of great importance.

Recent NFA Actions against CTA and CPO Managers – the NFA and the CFTC have been quite active lately. In this article we will be discussing some of the most recent actions against NFA member firms. This article will also provide common-sense advice on what managers can do the protect themselves from examination deficiencies.

Important NFA Rules for CTA and CPO Firms – there are a number of rules which the NFA has regarding the conduct of CTAs and CPOs. In general CTAs and CPOs must hold themselves out with the utmost professionalism. This article will detail this and other important NFA rules.

CTA and CPO advertising – there are a number of important rules regarding advertising for CTAs and CPOs. CPOs, especially, must be careful about advertising because of the restrictions under Rule 506 of Regulation D, an exemption that many CPOs utilize in offering their fund interests. Websites will be touched upon in this post and will also be discussed in greater depth in a subsequent posting.

CTA and CPO websites – many CTA firms utilize the internet to advertise their services. CPO firms will also sometimes have a (minimal) internet presence. This article will detail the considerations that both CTA and CPO firms face when creating and maintaining an internet presence and how to deal with internet based inquiries from potential investors.

NFA Exam Requirements for CTAs and CPOs – individuals of NFA member firms will generally need to have a Series 3 exam license and potentially a Series 30 exam. Some individuals may need to have a Series 31 exam license and, potentially in the future, forex CTAs and CPOs will need to have a Series 34 exam license. This article will discuss these exams and the process an individual will go through in order to register to take the exams.

CTA Expo Blog – the unofficial blog of the CTA Expo most recently held in October of 2009.  Information for CTA managers on business, legal and compliance issues.  Included is a directory of CTA firms and service providers.

Forex CTAs and CPOs – the regulatory light has been focused on retail spot forex managers recently. Read this article to get up to speed on recent CFTC and NFA pronouncements regarding this area of the industry. We will also provide information on Forex IBs and Forex FCMs.

In addition to the above topics we are hoping to add others over time. We welcome all feedback and encourage you to leave comments below. We will also attempt to answer CTA and CPO frequently asked questions.

If you are a manager or firm that needs to register as a CTA or CPO, or if you are contemplating registration, please contact Bart Mallon, Esq. of Cole-Frieman & Mallon LLP at 415-868-5345.

How to register as a CPO or a CTA

Many hedge fund managers choose to utilize futures and/or commodities in their trading purposes. Generally such managers will need to register as commodity pool operators (“CPO”) and as commodity trading advisors (“CTA”). The hedge fund itself will be deemed to be a commodity pool. For purposes of the Commodities Exchange Act (“CEA”), a future and commodity are functionally equal as it relates to hedge fund manager registration. Registration as a CPO or a CTA is an often overlooked part of the hedge fund formation process. Your attorney should discuss the requirements for registration and whether any exemptions from registration are available.

In addition to hedge fund managers, retail foreign exchange (“Forex”) managers may very soon be required to register because of the recently passed “Farm Bill.” The retail Forex markets have been very loosely regulated and the CFTC and NFA have been clamoring for authority to regulate this are of the markets. Accordingly, this article will give you the basics on how to register as a CPO and/or a CTA.

A very general outline of the CPO registration process is as follows:

Prerequisite – the Series 3 exam

Each CPO or CTA firm will need to have at least one Associated Person (AP). Generally an AP will be anyone in the firm who has contact with clients in something more than a purely administrative or clerical role. All managers and non-clerical employees will be APs. All APs must have passed the Series 3 exam. Information on the Series 3 exam:

  • Series 3 (National Commodity Futures Examination)
  • Cost: $95
  • Number of Questions: 120 True/False and Multiple Choice
  • Subject Matter: (part 1) Market knowledge and (part 2) U.S. regulations
  • Time: 2 hours 30 minutes
  • Passing Score: 70% for each part

Like the Series 65 exam, I highly recommend you spend plenty of time studying for the exam. If you would like some suggestions on various study guides, please let me know.

Filing the application forms with the NFA

During this process your compliance professional will: gain access to the NFA’s registration system on your behalf, input certain basic information on the Form 7-R (for your CPO/CTA firm) and Form 8-R (for the initial AP) – generally you will provide this information to your compliance professional prior to completing these forms, and submit the 7-R and 8-R on your firms behalf.

After the Form 7-R and 8-R have been submitted you will need to pay for registration ($200 registration fee for the CPO or CTA; $85 for each associated person or principal; $750 for NFA membership (this is an annual fee)). After payment has been submitted, the NFA will review your application. Typically registration should be complete within about 3-5 weeks. The next step will be to have your disclosure document approved by the NFA – your compliance professional can help you with this process.

You will be able to check on your registration through the NFA’s BASIC system.

Definitions

According to the CFTC website, the definition of CPO and CTA are as follows:

Commodity Pool Operator (CPO): A person engaged in a business similar to an investment trust or a syndicate and who solicits or accepts funds, securities, or property for the purpose of trading commodity futures contracts or commodity options. The commodity pool operator either itself makes trading decisions on behalf of the pool or engages a commodity trading advisor to do so.

Commodity Trading Advisor (CTA): A person who, for pay, regularly engages in the business of advising others as to the value of commodity futures or options or the advisability of trading in commodity futures or options, or issues analyses or reports concerning commodity futures or options.

Associated Person (AP): An individual who solicits or accepts (other than in a clerical capacity) orders, discretionary accounts, or participation in a commodity pool, or supervises any individual so engaged, on behalf of a futures commission merchant, an introducing broker, a commodity trading advisor, a commodity pool operator, or an agricultural trade option merchant.