Commodity Pool Operators ('CPOs') and Commodity Trading Advisers ('CTAs')

Overview: 

Many US (and non-US) investment advisers are registered with the National Futures Association (NFA) and regulated by the Commodity Futures Trading Commission (CFTC), by virtue of their trading in futures or options on futures, retail off-exchange forex contracts, or swaps or to invest in another commodity pool. Similar to the SEC, the CFTC is a regulatory body created by Congress, and the NFA is the association the CFTC established to regulate the practices of its members. Although the two entities often are referred to interchangeably, the CFTC is the regulator, whereas the NFA is responsible for rulemaking, registration, and enforcement, subject to CFTC review and approval.

Commodity Pool Operator (CPO) registration with the NFA is most common among AIMA members, though many members also are dually registered as a Commodity Trading Advisor (CTA). There are exemptions to registration requirements, although changes stemming from the Dodd-Frank Act bought many investment advisers into scope for registration – particularly due to their use of swaps.

Dodd-Frank called for harmonization of CFTC and SEC regulation. This notwithstanding, many dually registered members find themselves subject to similar-but-not-same rules governing practices and reporting, including differing reporting metrics. A notable exception is Form PF, which is shared by both the SEC and CFTC.

AIMA regularly advocates on behalf of its members relative to their CFTC/NFA obligations, as well as for increased harmonization of the SEC and CFTC to reduce redundancies and provide greater clarity on differences in reporting metrics and conduct rules. AIMA also provides its members with a wealth of educational content related to these obligations, whether through workshops, webinars or online resources available on demand.

Members are encouraged to get involved in any of several working groups that focus on these and other issues affecting the investment advisory community at large.

Behnam confirmed as Chairman, four nominees pending

On December 15, the Senate unanimously confirmed Rostin Behnam, who had been serving as CFTC Acting Chairman since January, to be Chairman of the agency.  That same day, President Biden announced his intent to nominate Summer Mersinger and Caroline Pham to fill the Commission’s two Republican seats, one of which is currently occupied by Commissioner Dawn Stump. 

Mersinger has spent the past two years at the CFTC, where she currently serves as chief of staff to Commissioner Stump and previously as the director of Legislative and Intergovernmental Affairs.  Prior to the CFTC, she spent 15 years working on Capitol Hill.  Pham is a managing director at Citi and is head of market structure for strategic initiatives in Citi’s Institutional Client Group.  Her past experience includes serving as special counsel and policy advisor to former CFTC Commissioner Scott O’Malia and also as a visiting fellow at the George Washington University Center for Law, Economics and Finance. 

Mersginer and Pham join Kristin Johnson and Christy Goldsmith Romero as pending nominees to join the Commission.  Johnson and Goldsmith Romero were nominated in September to fill the two vacancies left by the departures of Commissioners Brian Quintenz and Dan Berkovitz.  The next step will be their nomination hearings before the Senate Agriculture Committee, after which the Committee will vote whether to report their nominations favorably to the full Senate for consideration. 

AIMA will continue to monitor the nominations as they make their way through the confirmation process. 

CFTC publishes Reg Flex Agenda

The CFTC has published its latest Reg Flex agenda, and it includes several noteworthy items marked for potential rulemakings:

  • Event Contracts Concept Relese - the Commission may seek public input on regulation of event contracts and whether it should consider changes or additions to current Regulation 40.11, including changes to ensure its consistency with section 5c(c)(5)(C) of the Commodity Exchange Act (CEA).
  • Exempt Swap Execution Facilities (SEF) - the Commission would propose new part 47 regulations which would establish standards and procedures for exempting from SEF registration those facilities which are subject to comparable, comprehensive supervision and regulation on a consolidated basis by an appropriate governmental authority in the facility’s home country.
  • Protection of Digital Asset Customer Collateral - the Commission expects to propose separate segregation regimes for FCMs and DCOs for:  (1) customers trading futures contracts and options on futures contracts on digital assets that provide for physical delivery; and (2) customers clearing swaps that provide for the physical delivery of digital assets.  The Commission further expects to propose to revise its bankruptcy regulations to establish new account classes to reflect the separate segregation regimes for digital asset futures contracts and digital asset swaps that provide for physical delivery.
  • Portfolio Margining of Uncleared Swaps and Non-Cleared Security-Based Swaps - the Commission and SEC  issued a joint request for comment on potential ways to implement portfolio margining of uncleared swaps and non-cleared security-based swaps in accounts carried by broker-dealers, security-based swap dealers, swap dealers, and FCMs.  The CFTC Market Participants Division is considering recommending that the Commission, jointly with the SEC, propose portfolio margin-related amendments to the existing regulatory framework for swaps and security-based swaps.
  • Amendment to the Made Available to Trade (MAT) Process - the Commission may propose amendments to the MAT process to determine swaps that have been made available to trade and therefore subject to the trade exeuction requirement. 

(Last updated: January 13, 2022)