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Alternative Market Briefing

New CFTC rules add to buy-side firms’ growing compliance burden

Tuesday, December 18, 2012

Bailey McCann, Opalesque New York:

New rules for financial firms from the US Commodities Futures Trading Commission (CFTC) going into effect this month are requiring many firms to register as commodity pool operators. These new requirements are causing all types of firms to reconsider their activities in commodities in order to determine if the registration is worth it. However, even if a firm wants to claim that they are exempt, they will still have to register with the CFTC to claim the exemption.

In essence, firms will have to track – on a daily basis – their initial margin and net notional value when they make commodities trades in order to determine whether they meet the threshold for registration with the CFTC. If they do, they will have to add CFTC compliance to a growing list of regulations being imposed on alternative investment firms.

"The old exemption from registration prescribed by the CFTC was based on the types of investors that participated in the pool. As long as the participants satisfied the 'eligible person standard' of Regulation 4.7 of the Commodities Exchange Act (CEA), they were exempt," explains Matt Grinnell, Buy-Side compliance officer at Fidessa in an interview with Opalesque. Now, firms that meet the de minimus test for initial margin and net notional value will have to register regardless – and the clock is running out. Firms have until the end of this month to register with the CFTC.

"Private pool registration requires ......................

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