What is a Commodity Trading Advisor?
A Commodity Trading Advisor (“CTA”) is an individual or firm who provides individualized investment advice regarding the buying and selling of futures contracts or options on futures, or certain foreign exchange contracts for a fee. The Commodity Trading Advisor (CTA) registration is required by the National Futures Association, the self-regulatory organization for the industry. A CTA acts much like a financial advisor, except that the CTA designation is specific to providing advice relating to commodities trading.
CTA registration requires the applicant to pass certain proficiency requirements, most commonly the Series 3 National Commodity Futures Exam. Generally, CTA registration is required for both principals of a firm, as well as all employees dealing with taking orders from, or giving advice to, the public.
Registration as a CTA is required to give advice regarding all forms of commodity investments, including futures contracts, forwards, options and swaps. Investments in commodities often involve the use of significant leverage and as such require a high level of money management expertise.
CTAs generally charge a management fee based on the investor’s assets and an incentive fee based on net new profits of the account. Accounts are fully transparent and held at a designated brokerage firm in the investor’s name.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE SUCCESS.