CFTC Requires Most Registered Commodity Pool Operators, Commodity Trading Advisors and Introducing Brokers to Join the NFA

The Dodd-Frank Act requires hedge fund managers that engage in certain swap-related activities to register with the CFTC as either commodity pool operators (CPOs), commodity trading advisors (CTAs) or introducing brokers (IBs).  See “Do You Need to Be a Registered Commodity Pool Operator Now and What Does It Mean If You Do? (Part One of Two),” Hedge Fund Law Report, Vol. 5, No. 8 (Feb. 23, 2012).  Until now, such CFTC registrants have generally only been required to join the National Futures Association (NFA) if they were also engaged in commodities futures transactions.  To ensure that registrants engaging only in swap-related activities join the NFA – and thereby become “subject to the same level of comprehensive NFA oversight” – the CFTC recently adopted Final Rule 170.17 (Rule), which requires all registered CPOs and IBs, as well as many registered CTAs, to join the NFA.  This article summarizes the Rule, the relevant regulatory background and the CFTC’s rationale for adopting it.  For more on the impact of Dodd-Frank on hedge fund managers, see “How Have Dodd-Frank and European Union Derivatives Trading Reforms Impacted Hedge Fund Managers That Trade Swaps?,” Hedge Fund Law Report, Vol. 6, No. 40 (Oct. 17, 2013).

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