Understanding the Major Commodity Trading Advisor: A Legal Overview
Definition & Meaning
A major commodity trading advisor is a type of financial professional who manages investments in commodity interests, such as futures and options. Specifically, this term refers to a commodity trading advisor that is allocated or is expected to be allocated at least ten percent of a commodity pool's funds for trading. The allocation percentage is determined by the agreement between the commodity pool operator and the trading advisor, based on the total assets available for trading or the net assets of the pool at the time of allocation.
Legal Use & context
This term is primarily used in the context of financial regulation and investment management. Major commodity trading advisors operate under the regulations set forth by the Commodity Futures Trading Commission (CFTC) and are significant players in the commodity markets. Legal areas involved include financial regulation and investment law. Individuals or entities looking to engage with a major commodity trading advisor may benefit from using legal templates provided by US Legal Forms to ensure compliance with relevant regulations.
Real-world examples
Here are a couple of examples of abatement:
Example 1: A hedge fund operates as a commodity pool and allocates $1 million to a major commodity trading advisor. Since this amount represents ten percent of the total pool assets, the advisor qualifies as a major commodity trading advisor.
Example 2: A commodity trading firm manages a pool with $5 million in total assets. If they allocate $600,000 to a specific trading advisor, this advisor does not meet the threshold to be considered a major commodity trading advisor. (hypothetical example)