Private equity firm Carlyle to trade commodities

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If you are a private equity fund manager advising a fund that uses derivatives to hedge foreign exchange or interest rate risks, regulations of the U. This article addresses these issues through a series of short questions and answers. For example, when establishing a private equity fund that will acquire portfolio companies, it may still be desirable to manage risk through swaps positions, such as currency and interest rate swaps.

The CEA provides a private right of action with respect to persons or entities that violate the CEA or willfully aid, abet, counsel, induce or procure the commission of a violation of the CEA. Among other things, the CFTC can also seek injunctions and administrative sanctions including civil monetary penalties and revoking or restricting registration and exchange trading privileges.

At private equity commodity trading times, the fund meets either of the following tests with respect to its commodity interest positions:. Also, interests in the fund cannot be not marketed as or in a vehicle for trading in the commodity futures or commodity options markets.

Additional exemptions from CPO registration exist, although in most circumstances they would not apply in the context of a private equity fund. In addition to CPO registration, general partners and investment managers to commodity pools also need to assess their registration status as a commodity trading adviser a CTA.

A CTA is generally any person who, for compensation or profit, engages in the business of advising others as to the value or the advisability of trading in any contract of sale of a commodity interest. Use of cookies by Norton Rose Fulbright. We use cookies to deliver our online services. Details and instructions on private equity commodity trading to disable those cookies are set out at nortonrosefulbright.

By continuing to use this website you agree to our use of our cookies unless you have disabled them. Online services, resources, and private equity commodity trading Technical resources Stay connected.

We Are a Non-U. Manager of a Non-U. At all times, the fund meets either of the following tests with respect to private equity commodity trading commodity interest positions: The authors would like to thank two Chadbourne summer associates, Eric Zember and Matthew Cognetti, for their contributions to this article.

Private equity commodity trading CPO is generally any person engaged in a business that is of the nature of a commodity pool and who, in connection with that role, solicits, accepts, or receives capital for the purpose of trading in commodity interests.

Therefore, the issues discussed in this article are equally applicable to hedge funds as they are to private equity funds. If it has not already done so, a hedge private equity commodity trading that trades derivatives should carefully evaluate its CFTC registration status, including but not limited to CPO registration.

Compliance Obligations, 77 Fed. A private equity commodity trading CTA registration exemption exists with respect to registered CPOs that only provide commodity trading advice to the pool s for which they serve as a registered CPO. Subscribe and stay up to date with the latest legal news, information and events

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The definition of CTA may also apply to investment advisors for hedge funds and private funds including mutual funds and exchange-traded funds in certain cases. A CTA generally acts as an asset manager , following a set of investment strategies utilizing futures contracts and options on futures contracts on a wide variety of physical goods such as agricultural products, forest products, metals, and energy, plus derivative contracts on financial instruments such as indices, bonds, and currencies.

There are three major styles of investment employed by CTAs: Technical traders invest after analysing chart patterns. They often employ partially automated systems, such as computer software programs, to follow price trends , perform technical analysis , and execute trades.

Successful trend following , or using technical analysis techniques to capture swings in markets may drive a CTA's performance and activity to a large degree. Galen Burghardt, adjunct professor at the University of Chicago's Booth School of Business , found a correlation of 0.

Other non-trend following CTAs include short-term traders , spread trading and individual market specialists. Quantitative CTA's do statistical or quantitative analysis on market price patterns and try to make predictions based on such research. A CTA is often compensated through management fees calculated as a percentage of equity in the fund and profit incentive fees calculated as a percentage of new trading profits.

Usually no incentive fees are charged if the CTA does not generate a profit exceeding a hurdle rate or high-water mark. In the United States, trading of futures contracts for agricultural commodities dates back to at least the s. In , this law was replaced by an amended version named the Commodity Exchange Act. Later, trading expanded significantly following the introduction of derivatives on other products including financial instruments.

In July , the definition of commodity trading advisor under the Commodity Exchange Act was expanded by the Dodd-Frank Wall Street Reform and Consumer Protection Act to include "persons who provide advice on swap transactions". Prior to this, swaps were not included in the CTA definition. In , the CFTC adopted the first comprehensive regulation for commodity trading advisors, which was later strengthened by additional rules in and Under the Commodity Exchange Act , CTAs must register with and conform to the regulations of the CFTC, including providing records and reports, unless they meet the Commission's criteria for exemption.

Under the Commodity Exchange Act qualifying individuals may be exempted from CTA registration with the CFTC, including if their primary business is not as a CTA, they are registered with the Securities and Exchange Commission as an investment advisor, and if they have not provided trading advice to more than 15 persons. If an individual is exempt from registration, they must still file with the NFA.

Nonetheless, exempt CTAs are still regulated in some form. They additionally need to file a public notice disclosing their existence and exempt status. They must provide an offering memorandum to their investors, as well as a quarterly account statement and an annual report.

These reports are used for market surveillance as well as for investigations or litigation cases. The CFTC also increased disclosure requirements and amended the registration criteria. If a commodity trading advisor engages in significant advisory activities regarding securities, it could be required to register under the Investment Advisers Act of Advisers Act. However, most commodity trading advisors are able to rely on an exemption from registration set forth in Section b 6 of the Advisers Act.

This exemption is available to registered commodity trading advisors whose business does not consist primarily of acting as an investment adviser. From Wikipedia, the free encyclopedia. Hedge Funds and Other Private Funds: Regulation and Compliance Edition. Cornell University Law School. Retrieved 7 June Retrieved 4 June Encyclopedia of Alternative Investments. Retrieved 15 May Measuring the impact of trend following in the CTA space".

Retrieved 16 May Retrieved 5 June Washington and Lee Law Review. Retrieved 29 May Commodity Futures Trading Commission.

Handbook of Hedge Funds. Retrieved 13 June Retrieved 14 May CFTC , F. Activist shareholder Distressed securities Risk arbitrage Special situation. Algorithmic trading Day trading High-frequency trading Prime brokerage Program trading Proprietary trading.

Arbitrage pricing theory Assets under management Black—Scholes model Greeks finance: Vulture funds Family offices Financial endowments Fund of hedge funds High-net-worth individual Institutional investors Insurance companies Investment banks Merchant banks Pension funds Sovereign wealth funds. Fund governance Hedge Fund Standards Board. Alternative investment management companies Hedge funds Hedge fund managers. Retrieved from " https: Commodity markets Financial services occupations. Views Read Edit View history.

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