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Commodity Pool Operators (CPOs) & Commodity Trading Advisors (CTAs)

  • Commodity Pool Operator and Commodity Trading Advisor Exemptions and Exclusions

    Exclusion from the Commodity Pool Operator and Pool Definitions

    CFTC Regulation 4.5 makes available an exclusion from the definition of the term "commodity pool operator" (CPO) for certain otherwise regulated persons in connection with their operation of specified trading vehicles. Persons desiring to claim an exclusion from the CPO definition under CFTC Regulation 4.5 must file a notice of eligibility electronically with the National Futures Association (NFA).

    CFTC Regulation 4.5 also excludes certain employee benefit plans from being construed to be commodity pools. This relief is self-executing; the operators of these trading vehicles are not required to file any notice or make any specified representations to claim this exclusion.

    Exemption from Registration as a Commodity Pool Operator

    CFTC Regulation 4.13 makes available an exemption from CPO registration for certain persons. Broadly speaking, these persons are the operators of "family, club and small" pools, as defined in the regulation, and pools that have limited futures activity or that restrict participation to sophisticated persons.

    A person claiming this exemption must file a notice electronically with the NFA.

    Exemption from Certain Part 4 Requirements Where Pool Meets Certain Trading Criteria

    CFTC Regulation 4.12(b) provides an exemption from certain Part 4 requirements for the operators of certain commodity pools. Among other things, the pools these CPOs operate do not commit more than 10 percent of the fair market value of their assets to establish commodity interest trading positions and they trade commodity interests in a manner solely incidental to their securities trading activities.

    Persons desiring to claim exemption under CFTC Regulation 4.12(b) must file a notice of claim for exemption electronically with the NFA.

    Exemption from Registration as a Commodity Trading Advisor

    Section 4m(1) of the Commodity Exchange Act (CEA), 7 USC 6m(1), provides an exemption from registration for a person who, in the preceding 12 months, has not furnished commodity trading advice to more than 15 persons and who does not hold himself out generally to the public as a commodity trading advisor (CTA).

    Section 4m(3) of the CEA, 7 USC 6m(4), provides an exemption from CTA registration for a person:

    • who is registered with the Securities and Exchange Commission as an investment adviser;
    • whose business does not consist primarily of acting as a CTA; and
    • who does not act as a CTA to any investment trust, syndicate, or similar form of enterprise that is engaged primarily in trading in any commodity for future delivery on or subject to the rules of any contract market or registered derivatives transaction execution facility.

    CFTC Regulation 4.14 provides that a person who meets the requirements set forth in any one of paragraphs (a)(1) through (10) of the regulation is not required to register as a CTA.

    If a person is exempt from registration as a CTA pursuant to paragraph (a)(8) of the regulation, the person must file a notice of exemption electronically with the NFA.

    The relief available under Sections 4m(1) and 4m(3) of the CEA and CFTC Regulations 4.14(a)(1)-(7) and (a)(9) is self-executing; these persons are not required to file any notice or make any specified representations to claim the relief.

    Exemption from Certain Part 4 Requirements Where Participants are "Qualified Eligible Persons"

    CFTC Regulation 4.7 makes available an exemption from certain Part 4 requirements with respect to registered CPOs operating commodity pools whose participants are limited to "qualified eligible persons" and with respect to CTAs who advise "qualified eligible persons," as defined in the regulation.

    Briefly stated, qualified eligible persons include such persons as certain investment professionals, knowledgeable employees, qualified purchasers, non-United States persons, and accredited investors who meet a portfolio requirement.

    Persons desiring to claim exemption under CFTC Regulation 4.7 must file a notice of claim for exemption electronically with the NFA.

    Filing

    Notices claiming CPO or CTA exclusion or exemption must be filed electronically with NFA through its Exemptions System.