Release:                  #4296-99
For Release:          August 2, 1999


Washington --The Commodity Futures Trading Commission (Commission) today issued proposed amendments to its rules regarding the computation, documentation and disclosure of the past performance of trading programs offered to the public by commodity trading advisors (CTAs).

The issue of how best to compute rate of return (ROR) for partially-funded, or "notionally funded," accounts of CTAs has been a subject of discussion by the Commission and industry participants for many years. Central to this issue is the question of which amount should be used as the denominator in the ROR calculation -- actual funds or the nominal account size agreed upon between the CTA and the client to establish the client's level of trading in the CTA's program.

The proposed rule amendments respond to a National Futures Association (NFA) proposal to adopt nominal account size as the uniform basis for CTAs to calculate RORs. The NFA proposal was presented in the Commission's June 1998 concept release regarding performance data and disclosure for CTAs and commodity pools. After evaluating comments filed in response to that release, and having carefully considered the benefits and drawbacks of each method of calculating ROR, the Commission is proposing rule revisions to provide that ROR be computed by dividing net performance by the nominal account size. Consistent with this proposed change in the computational method, the proposed rules' documentation and disclosure requirements focus on conveying a numerical sense of the impact of partial funding on the leverage and volatility applicable to the client's account. The proposal also seeks to ensure that customers are not misled as to the amount of actual funds managed by a CTA.

These proposed rule amendments were published in the Federal Register on August 2, 1999, (64 FR 41843). Copies may be obtained by contacting the Commission's Office of the Secretariat, Three Lafayette Centre, 1155 21st Street, NW, Washington, DC 20581, (202) 418-5100, or by accessing the Commission's website at