What Is a Commodity Trading Advisor (CTA)?

A commodity trading advisor (CTA) is an individual or firm that provides personalized advice regarding buying and selling futures contracts, 澳洲幸运5开奖号码历史查询:options on futures, and retail 澳洲幸运5开奖号码历史查询:off-exchange forex contracts or swaps.

Advisors who give such advice must be registered as a CTA by the 澳洲幸运5开奖号码历史查询:National Futures Association (NFA), the self-regulatory organization for the derivatives industry.

Understanding a Commodity Trading Advisor (CTA)

The Grain Futures Act was passed in 1922, regulating futures trading. It was later replaced by the Commodity Exchange Act of 1936 which further regulated commodities and futures trading and required that certain trading be done on exchanges.

The Commodity Futures Trading Commission Act of 1974 was enacted to amend the Commodity Exchange Act. It created the 澳洲幸运5开奖号码历史查询:Commodity Futures Trading Commi🤡ssion (CFTC) and marked the first use of the term "commodity trading advisor" or CTA.

Investing in commodities often involves the use of significant leverage and therefore requires a higher level of expertise to avoid the potential for large losses. The CFTC has gradually expanded the requirements for CTA registration. It established the NFA to handle CTA registration and ensure that registered members complied with CFTC regulations and NFA rules.

A CTA is a 澳洲幸运5开奖号码历史查询:financial advisor who provides advice specifically related to commodities trading. Applicants must meet certain proficiency requirements to obtain the CTA registration including passing the Series 3 National Commodity Futures Exam. Certain criteria can exempt advisors from CTA registration if they're met.

Exemptions From Registration

Registration as a CTA by the National Futures Association is required for individuals or firms that provide advice on commodities trading unless one of the following criteria is met:

• Advice was given to 15 people or fewer over the previous 12 months and the individual or firm doesn't hold itself out to the public as a CTA.
• The individual or firm is registered with the CFTC and the advice given concerning commodities investing is incidental to the individual's profession or the firm’s business.
• The advice provided isn't based on knowledge of or targeted directly to a customer’s trading interests or trading account.

Other Requirements

CTA registration is generally required for principals of a firm as well as all employees who take orders from or give advice to the public. CTAs are required to provide advice regarding all forms of commodity investments including futures contracts, forwards, options, and swaps.

CTA Funds

A CTA fund is a hedge fund that uses a 澳洲幸运5开奖号码历史查询:managed futures strategy. It invests in futures contracts and uses a vari🧔ety of trading strategies. These may include systematic trading and trend following. Tund managers can actively manage inv🧜estments using discretionary strategies as well, however.

CTA f🐭unds offering a managed futures strategy must be registered with the CFTC and NFA.

The Bottom Line

A commodity trading advisor (CTA) provides trading advice regarding commodities to the investing public. The National Futures Association (NFA) monitors the actions of CTAs to ensure that they follow its ru🍨les and to protect investors. Registration with the NFA is required in most cases.