'Fund' / Structure

[jgfutures]

Quote from JTrader7:

Thanks KTM.

Is there anything to prevent managing both commodities and equities together in the same fund - legal, cost or otherwise?

Good trading to all.

Best
JTrader7

J,
In the US, equity and commodity accounts must be seperate. You could have both accounts with the same FCM, but must be seperate accounts. From a structure perspective, I do not know if you can have both under one fund. The SEC has different guidleines than the CFTC. I do know the CFTC will require you to register as a CTA should you begin managing more than low 6 figures. At that point, I doubt you could be a CTA and trade equities under the same fund name and structure.

This is just my personal opinion, I would suggest contacting the SEC and NFA.

Good luck.

 

[Aaron]

Quote from JTrader7:

Is there anything to prevent managing both commodities and equities together in the same fund - legal, cost or otherwise?

Trading both in the same fund is more costly in time or money for both accounting and compliance.

Equities have complex unrealized capital gain issues. When an investor makes a withdrawal you have to figure out what portion of the realized and unrealized gains he takes with him.

Futures have complex NFA compliance issues. Unless you fit an exemption you'll need to become an NFA member and comply with the CPO rules.

These hurdles are not insurmountable if you are determined.

Aaron Schindler
Schindler Trading

 

[Aaron]

Quote from jgfutures:

At that point, I doubt you could be a CTA and trade equities under the same fund name and structure.

I'd be surprised if this were true. Do you have a source or know of a law or regulation?

 

[CPTrader]

No law prohibits trading both futures and equities in the same fund. I personally know of many friends that do this. Trading both as Aaron also mentions, does make administration/accounting a little more difficult.

 

[jgfutures]

Quote from Aaron:

I'd be surprised if this were true. Do you have a source or know of a law or regulation?

Aaron,
I do not have a source to point to for this statement, that is why I included it was merely my personal opinion and that J should contact both regulating authorities.
I am familiar with NFA regulations, and as you mentioned recently, maybe it can be done. In my opinion, it seems the obstacles outweigh the benefits of running both under one fund...
especially when we are talking about a total of 4 investors.

Ps. congrats on a good year

 

[jgfutures]

Quote from CPTrader:

No law prohibits trading both futures and equities in the same fund. I personally know of many friends that do this. Trading both as Aaron also mentions, does make administration/accounting a little more difficult.

CPTrader,
Thanks for clarifying.
Now I'm curious as to how one markets such a fund. Any more insight into an equity/commodity fund would be appreciated.

 

[ktm]

Trading commodity regulated products exclusively can potentially limit you to sole regulation by the NFA/CFTC. There are qualified opinions out there that anyone properly NFA registered and trading commodity products exclusively can avoid being regulated by the SEC. This could avoid the need to register as a RIA, etc...

Marketing has been discussed elsewhere. Listing with databases and working with 3rd party marketers are basics and good starting points, once it's more mature and doing well it should be word of mouth.

 

[OddTrader]

Quote from ktm:

Trading commodity regulated products exclusively can potentially limit you to sole regulation by the NFA/CFTC. There are qualified opinions out there that anyone properly NFA registered and trading commodity products exclusively can avoid being regulated by the SEC. This could avoid the need to register as a RIA, etc...

I can see some funds trading only spot currencies. Are there any regulations and registrations officially required for that? TIA.

 

[ktm]

Currencies are regulated by the NFA.

I think you run into regs based on whose money you are working with.

 

[OddTrader]

Q
http://www.post-gazette.com/pg/05314/604092.stm

Heard on the Street: Hedge funds avoid SEC registration rule

Thursday, November 10, 2005
By Gregory Zuckerman and Ian McDonald, The Wall Street Journal

A large number of major hedge-fund firms won't be registering with the Securities and Exchange Commission despite new rules aimed at forcing most hedge-fund advisers to sign up by early next year.

These firms have adopted measures to take advantage of a loophole provided by the agency -- potentially undercutting the SEC's efforts to uncover fraud and get a better understanding of the growing business.

The firms include SAC Capital Management LLC, Kingdon Capital Management LLC, Citadel Investment Group PLC, Eton Park Capital Management LLP, Lone Pine Capital and Greenlight Capital.
UQ