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Dodd-Frank 30 Day Countdown: Day 15

Insight Robin Powers Robin Powers · July 01, 2011

Definition of “Commodity Pool” Expanded July 16

The CFTC is proposing to grant temporary relief from certain provisions of Dodd-Frank that will delay the requirement that a person register as a commodity trading advisor (“CTA”), for those persons whose  advice regarding commodity interests involves swaps, or commodity pool operator (“CPO”), for those persons who operate collective investment vehicles whose commodity interest investments include swaps.

Prior to Dodd-Frank, a “commodity pool” was defined as a fund in which a group of investors would combine their resources in order to trade futures and commodities. The expanded definition under Dodd-Frank (set to come into effect automatically on July 16), will encompass any investment vehicle that trades non-security based swaps. This means that after July 16, any pooled investment vehicle that invests in commodities derivatives, interest rate derivates, and most currency derivatives (just to name a few), will be considered a “commodity pool.”

Likewise, CPO and CTA are also being redefined.  Any general partner or investment adviser of a pooled investment vehicle that can trade swaps will be required to register with the Commodities Futures Trading Commission (CFTC) and the National Futures Association (NFA) unless otherwise exempted.  Previously, CPO’s and CTA’s were able to avoid the registration and other regulatory requirements under an exemption based on the CFTC Rule 4.13(a)(4) or (8) after they notified the NFA. The CFTC plans on making the exemptions harder to come by under the new regulatory regime.

The CFTC published its Notice of Proposed Order in the Federal Register for a comment period that expires today, and hopes to issue a final Order by July 16, 2011.

-Stephanie Kane co-authored this post