CTA Startup

Your main costs are NFA membership, CFTC registration, disclosure doc preparation, accounting, computers, data, and software. Other than the NFA and CFTC registration, these are variable costs. How much you spend for startup and maintenance depends on how much you can do yourself and what kind of trading setup you need versus what you already have.

It's not expensive to start a CTA. Don't let that hold you back.

 

I just wanted to say thanks for all of the great, informative posts, especially Aaron. Lots of good info guys!

 

Registering as a CTA with the NFA only requires passing the Series 3 and a $100.00 annual fee to the NFA.

Actual NFA membership requires not only passing the Series 3, but also requires a $1,000 annual fee.

NFA membership is required for any CTA that has more than 15 clients.

http://www.cftc.gov/opa/backgrounder/opacpocta.htm

 

CTA registration has recently gone up to $200. And there's also the $85 principal fee (up from $70).

If you have had less than 15 clients during the past 12 months you are required to register and become an NFA member if you generally hold yourself out to the public as a CTA.

More details...http://www.nfa.futures.org/registration/cta.asp

 

What are the requirements of notional funding. I realize the consent forms must be signed, but what other requirements must be met. ie. An individual wants to open a menaged account for $50,000 but wants it traded as $100,000. Must that individual keep the extra $50,000 in a seperate account at all times so that it is available if needed or is it just a written pledge? Any professional insight is appreciated.

 

I thought that just meant to trade the acct more aggressively using more size

-Fast

 

Yeah, like Fast Trader says, it just means to trade the account more aggressively. The account owner doesn't need to keep the extra funds on hand. Just make sure the account owner knows they can lose more than their account balance and would have to send in additional money to the broker to cover those losses.

 

What happens if they don't send in more money?

 

Then the investor will owe money to the broker. The broker will freeze the account, liquidate the positions, and try to collect any remaining debt from the investor. You as the CTA aren't on the hook. (Unless the investor wants to sue you — which is likely if you didn't follow the trading program you said you were going to and exceeded or failed to disclose the riskiness of your program.)

Some investors would rather invest in a pool than a separately managed account. There is limited liability as LLC investors or limited partners — an investor can't lose more than their original investment. Some investors would rather have a separately managed account for better transparency and cross margining with other managers. They each have their advantages and many CTA's (Schindler Trading included) offer both.

 

Thanks Aaron. How "hard" would the broker be about collecting the money? I know that deligence is required on the broker's part to "qualify" them but if for some reason they could not come up with it would they sue them, force them into bankruptcy if needed?