Exactly -- and that is why the survivorship rate of CTA start-ups is very low. Barriers to entry are not high -- series 3, Dis doc, NFA/CFTC registration. If you stay away from lawyers, the startup costs can be held to a minimum. Staying inn business, however, is most difficult and it goes beyond simply trading success. This is in contrast to other professional and related money management business where the hurdles to entry can be quite steep, but once you are in.......
I've been doing plenty of investigation on the same type of move as a CTA trading OPM. It seems that the barriers to entry are small financially but the key for me is getting enough money under management to be OK with just management fees at first. It seems the upside to being successful in this business can fuel any financial desires and dreams you may have. And you can just about manage upwards of $50-$75 million with little overhead and a very small operation. However, the real barrier to entry is trading skill and money management. I have been trading for several years and managing others using my own discretionary stratregy for 3 years. Although I have felt for a while that I am a proficient trader, I realize that the psychology of managing OPM(especially as your own company) can be stressful and throw a good trading strategy out of whack. For that reason, I have actually learned many lessons about my own psychological setup over the last couple of years. I have learned how I react in losing times and I have learned what it takes to keep investor feelings from affecting your trading. The lessons I have learned in the times that I have lost money are far more beneficial than the winners.
Definitely not. The less competition in my business the better. Actually, like you said, there are pros and cons of managing money for other people. Other's have mentioned the increased income as an advantage. A disadvantage is the loss of freedom. Some of the great things about being a trader disappear if you become a money manager. As an individual trader you have no boss, no clients, no office politics, no commute, live where you want, no meetings, no time clock. As a money manager you have clients and regulators and auditors and meetings. It's like being a chef. There's a difference between an amateur chef and a professional one. Just because you are good at cooking and enjoy it, doesn't mean you'll enjoy running a restaurant. To each his own.
What are the regulations and/or relevant regulatory body when it comes to trading options on futures? Let's say that one's fund was primarily trading equity options but that a small percentage was dedicated to trading futures options. Would both the SEC and NFA be involved. Thanks
When first starting up, how does one get listed and officially tracked on the major databases, and is there a minimum AUM requirement or number of outside investors to be considered? Thanks.
Check out IASG.com and Autumngold.com. I've seen funds there with less than 50K and no investors. I'm not sure what definitive requirements they may have. What are the regulations and/or relevant regulatory body when it comes to trading options on futures? Let's say that one's fund was primarily trading equity options but that a small percentage was dedicated to trading futures options. Would both the SEC and NFA be involved. Thanks[/QUOTE] Options on futures are CFTC/NFA regulated. Equity options and Index options are considered securities and are SEC regulated. As far as how much you would need to transact before any registrations are required, I'm not sure about that. The safe play is to seek registration as an IA if you are doing ANY trading outside of NFA products.
I hope this doesn't soond lazy, but I've been told by a couple fo CTA's that the have borrowed Disclosure Documents from other CTA's to use as a "skeleton" for their own. Simply being able to change the information around and performance numbers would sure be easier than typing up the whole thing from scratch..Any input?
I know this thread is over a year old but I have few issues to bring up. I know that the CTA sends an invoice to the FCM to deduct the fees for incentive and management, what about commission sharing? My consultative services are basically hedging programs for livestock so performance isn't always top priority, risk management and price hedging are. I was wanting to charge a commission on-top of the FCM, but not to exceed those of discount full service ag focused brokers. How does one charge the commission, does the FCM handle everything and then send you your amount?