Sure. You can structure the compensation however you like as long as it is fully disclosed in your NFA-approved ddoc. The most common methods of compensation are a percentage of assets, a percentage of profits, perhaps with a highwater mark and/or hurdle rate, and a portion of commissions. If you wanted you could have a flat fee, a sales load, a redemption fee, whatever.
Your "100% of everything over 50% profit" is a 100% incentive fee with a 50% hurdle rate.
I would be wary of this fee structure as an investor. You have a call option on all profits above the 50% hurdle rate. This is a deep out of the money call. The value of deep out of the money options is highly dependent on the underlying volatility. You, as the manager, have a big incentive to take on a lot of risk/volatility and shoot for a big return to try to get that big payoff. The usual 20%-of-profit, with a low or no hurdle rate, is also a call option, but it is closer to at-the-money and is less sensitive to the volatility of the underlying and is on only one-fifth of the profits, rather than all of them. There is less incentive to take on excess volatility. I think it works better in aligning the investor's and manager's interests.
Schindler Trading charges a 2% management fee and 20% of new profits with a highwater mark and no hurdle rate. We don't receive any portion of the commissions paid. CTA's that get compensation from commissions have an incentive to churn, so I would frown on it as an investor.
Aaron Schindler
Schindler Trading
