Release: #4829-03
For Release: August 4, 2003

CFTC Modernizes Rules on Commodity Pool Operators and Trading Advisors

WASHINGTON, D.C. – The Commodity Futures Trading Commission (CFTC) announced that it has modernized a number of key rules regarding commodity pool operators (CPOs) and commodity trading advisors (CTAs) to rationalize requirements, remove unnecessary regulatory burdens, and to facilitate greater participation in the commodity futures and options markets, which can benefit all market participants by increasing liquidity. The changes announced include:

• Providing that institutions excluded from the definition of CPO under Rule 4.5 will no longer be restricted in the amount of futures transactions they can enter into to qualify for the exclusion
• Providing additional exemptions from the CPO and CTA registration requirements for those entities that have limited futures activity or that restrict participation to sophisticated persons
• Facilitating communications by CPOs and CTAs with prospective and existing pool participants and clients, including permitting electronic communications
• Eliminating duplicative regulatory requirements for “master/feeder fund” structures
• Addressing certain issues related to calculation and presentation of past performance by CPOs and CTAs

Chairman James E. Newsome noted:

"I am�pleased that we have been able to continue our implementation of the Commodity Futures Modernization Act with rule modernization efforts that address an important sector of the futures markets, pooled investment vehicles and their operators and advisors. I hope that these improved rules�will generate additional interest in the risk management tools offered by the futures market, which help a great number of businesses, investors, and financial institutions to protect themselves against volatility in commodity prices, interest rates, foreign exchange rates, and stock prices. Since the passage of the CFMA, the Commission has implemented a number of rule modernizations affecting futures exchanges, other trading facilities, and now market intermediaries. We will continue to review our requirements to identify further opportunities to improve the efficiency of our oversight and to remove unnecessary burdens on markets, intermediaries, and market participants without impacting on our effectiveness as a regulator.”

The rule amendments are being published in the Federal Register, and, with the exception of the amendment to Rule 4.35, will be in effect immediately. Amended Rule 4.35 will be effective 30 days after publication. Copies of the rules may be obtained by contacting the Commission’s Office of the Secretariat, Three Lafayette Centre, 1155 21^st Street, N.W., Washington, D.C. 20581, (202) 418-5100 or by accessing the Commission’s website, www.cftc.gov.