Define Commodity Trading Advisor (CTA)

Commodity Trading Advisor (CTA)

What Is a Commodity Trading Advisor (CTA) and How Does It Work?

A commodities trading adviser (CTA) is a person or company who offers personalized advice on the purchase and sale of futures contracts, options on futures, and certain foreign currency transactions. The National Futures Association, the industry's self-regulatory body, requires commodities trading advisers to register as commodity trading advisors (CTAs).

TAKEAWAYS IMPORTANT

• A commodity trading adviser (CTA) is a person or business that is registered to provide commodity trading advice.

• To be registered as a CTA, advisors must meet strict proficiency standards.

• CTAs must be registered in order to provide advice on all types of commodities investments.

• Individuals or businesses who give commodity trading advice must be CTA registered, according to the National Futures Association.

Getting to Know a Commodity Trading Advisor (CTA)

The Grains Futures Act, which regulates futures trading, was established in 1922. The Commodity Exchange Act of 1936, which further regulated commodities and futures trading and forced certain trade to take place on exchanges, eventually superseded it. The Commodity Futures Trading Act of 1974, enacted under the Commodity Exchange Act, was the first time the term "commodity trading adviser (CTA)" was formally used.

Commodity investments can entail enormous leverage, necessitating a greater degree of competence to trade successfully while minimising the risk of huge losses. Commodities trading advisor laws extend back to the late 1970s, when commodity markets became more accessible to regular investors. Over time, the Commodity Futures Trading Commission (CFTC) has increasingly increased the registration requirements for CTAs.

A CTA is similar to a financial counsellor, with the exception that the CTA title is reserved for commodities trading advice. To get a CTA registration, the applicant must meet specific competence standards, the most frequent of which is passing the Series 3 National Commodity Futures Exam, however other methods may be used as proof of competency.

Alternative Directions

Individuals or businesses who give commodity trading adviser must register as CTAs with the National Futures Association unless they meet one of the following exemption criteria:

Over the last 12 months, the individual or business has offered advice to a maximum of 15 people, and the individual or firm does not present itself to the public as a CTA.

The individual or firm is engaged in one of the Commodity Exchange Act's specified companies or professions, or is registered in another capacity, and the commodities investment advice supplied is incidental to the individual's or firm's main activity.

The advice given is not based on information of a customer's commodities interest account or is specifically tailored to that account.

Requirements

In general, CTA registration is necessary for both the firm's leaders and any employees who take orders from or provide advice to the public. CTAs must offer advice on all types of commodities investments, including futures contracts, forwards, options, and swaps.

The CTA Fund is a non-profit organisation dedicated to

A CTA fund is a hedge fund that achieves its investing goal by using futures contracts. To achieve their investment goals, CTA funds employ a number of trading tactics, including systematic trading and trend following. Good fund managers, on the other hand, actively manage investments by combining discretionary tactics like fundamental research with systematic trading and trend tracking.