Despite the uninspiring title, many things are going on in the regulatory space. We track the trends for registered CTA, CPO, Introducing Brokers, FCM, and Associates, and how the total of registered entities changes over time. In recent times, the number of entities that are trading futures for clients has declined. Despite rather good performance the number keeps going down.
Below we plot the number of CTAs and CPOs. We note that some CTAs are also CPOs, so the number of entities is not simply the sum of the two. This data is sourced from the NFA that is housing a number of important Due Diligence tools (primarily initial background checks through their BASIC system). Each time you are considering a new Managed Futures manager, check their registration status and the background of the principals. Make sure you understand their history.
Not all CTAs are registered with the purpose of trading money for new clients but may hold onto their registrations for sentimental reasons or for potential future business opportunities. You can compare this to the number of CTAs in the NilssonHedge CTA Index, where you will note that the number of active managers is substantially less.
A commodity trading advisor (CTA) is a person or business that, in exchange for payment or profit, provides direct or indirect advice to others regarding the worth of or wisdom in purchasing or disposing of futures contracts, options on futures, retail off-exchange forex contracts, or swaps. Exercising trading authority over a customer's account and providing commodities trading advice based on, or customized to, the positions held in the cash market, the commodity interests, or other conditions or traits of specific clients are examples of direct advice. Giving advice through printed publications or other media is an example of indirect advice.
A CPO is an individual or business that manages a commodities pool and raises money is known as a commodity pool operator (CPO). A commodity pool is a business where funds given by several people are pooled for trading futures, options on futures, retail off-exchange currency contracts, swaps, or investments in other commodity pools.
The total membership is the sum of each corporate entity and gives a somewhat accurate trend indication. As noted here, the trend has been downward-sloping since we started tracking these numbers.
An Introducing Broker is an individual or firm that accepts orders to buy/sell future contracts. These organizations are typically acting as salesmen for CTAs and some of them are trying to introduce managers to clients and earn fees through a markup on for instance commissions.
Here the trend is also towards fewer and fewer Introducing Brokers.
Associates are individuals that are "associated" with a particular firm (CTA/CPOs, IBs/FCM, etc). This count is essentially a shortcut for the number of people who are working directly with clients in the Futures Industry with the intent of selling Futures market services.
Our final chart shows the number of Futures Commissions Merchants ("FCM") that are active. An FCM is essentially a clearer of future business. In layman's terms, this is an investment bank for Futures trading.