Quote from Arjun1:
It makes no sense to start a CTA/CPO fund if you have less than the registration minimum of 16 clients and less than the minimum $25 million in AUM.
Since you have less than that you are much better off with an advisor account at IB:
http://institutions.interactivebrokers.com/en/accounts/advisors/advisorsMain.php?ib_entity=inst
BTW notice IB has excellent turnkey solutions for advisers, hedge funds, and prop. trading groups.
I think that exemption only applies if you're not charging fees... if you have any money under management that you are charging fees on you must register... Not positive but should be investigated. Additionally if the OP is going to be trading forex they will need the Series 34 as well...
A huge part of being a cta is understanding the operational end of things. There is a lot of compliance you need to have in place and are responsible for... If you are a one man band, raising funds, opening accounts, collecting docs, providing customer service (especially during a draw-down), maintaining your research, providing monthly reports, keeping your disclosures up to date and yes finally watching the and trading, TAKE A LOT OF TIME.
Research the CTA business model and then write a business/operations plan. Know when and how you are going to accomplish these things and what if any cost there will be.
You also need to clearly have a plan for doing all of this when your revenues are low. Each year your paycheck is going to be different, how do you keep your firm alive when you only make 10k. How do you keep yourself and your own finances afloat when things are that slim? All these things you have to case study and think through. Don't hope for the best, plan, plan, plan and if you can't make sense of it, don't risk your clients money or your good name.
Trading for yourself will never make you the money that managing funds will, but the responsibilities and work load are very different.
The NFA is your friend, spend some time getting into those documents and requirements and don't be afraid to call them for direction. Launching a CTA on your own isn't that hard and if you're boot-strapping your company you need to save every penny you can... and I mean every one.
When I launched my firm, I sold the three story house and the convertible Jag, bought a Chevy S10 and moved into a studio apartment (no lie). Unless you have significant personal assets, or can immediately raise a very large amount of money where admin fees will allow you to service all your current debt for the next three to five years, you will likely need to downsize or make some provision for surviving.
Here is the truth about small business... it's not rocket science but it takes common sense. If you do your home-work and the numbers don't add up, making unrealistic adjustments to make yourself feel better doesn't improve your odds.
Performance fees... for now forget them. You're going to have good years and you're going to have bad years. You can't count on them, at least not until the AUM are so large that a good year covers your for several years.
Admin fees... these are the hardest to collect and if you're new your clients are going to him and haw about them. To bad. You're running a business here and you need to keep the lights on to do your job. If they think a "good trader" shouldn't have to charge an admin fee, they don't understand investing - drop them and look for a client who gets it.
If you charge 2% for an admin fee than for every million you have under your belt you will collect $20k before taxes... and while we're talking about taxes, make sure you do your homework here and have hired a good accountant.
In the first couple of years you may have difficulty raising your first three to five million, so the question is, can you live and run your company on $20k a year. If not, what is your fix, downsize, second job, trust fund... point being you have to know before you jump in, how you will manage company growth and personal/family needs.
