A commodity trading adviser (CTA) manages futures trading accounts for his clients. A CTA selects and places all trades for customer accounts. The CTA typically is compensated with a percentage of the profits he earns in the client accounts. The National Futures Association (NFA) handles the registration of commodity trading advisers.
National Commodity Futures Examination
A prospective CTA must pass the National Commodity Futures examination, commonly called the series 3 exam. The series 3 is required for any individual working for a commodity futures broker in a customer sales or service capacity. The exam consist of 120 questions, has a two-hour, 30-minute time limit and is administered by the Financial Industry Regulatory Authority (FINRA). Series 3 results are valid for two years, so application for CTA registration must begin within that time frame.
The prospective commodity trading adviser must apply to the NFA for membership as a CTA. The application is accomplished by completing the online forms 7-R and 8-R. The form 7-R is application as a company for NFA membership. The form 8-R is completed for each individual in the company who will be trading for client accounts. An individual who will be an independent CTA must complete both forms. A fingerprint card must be sent to the NFA as part of the application process.
The initial application fee for a CTA registration is $200, as of 2011. An 8-R application for each person working in the CTA company requires an $85 application fee. For an individual applying to be a CTA the total application fees will be $285. The first-year membership fee as a CTA to the NFA is $750 in 2011. The total minimum payment to apply for CTA registration is $1,085.
CTA Registration Considerations
The NFA website lists several circumstances in which registration as a CTA is not required. An individual providing commodity trading advice to fewer than 15 clients during the year and not advertising herself as a CTA does not need to register. If someone is already a registered investment adviser (RIA), CTA registration is not required. Individuals who provide trading advice on a general basis solely through email, a website, newsletters or seminars are not required to register as CTAs.