Traders' Roundtable

an idea where I can find out of the CTA business more? What do they do and why. Is there a guide to traders thinking of becoming CTA's.
I never thought of them as better than a broker - after all it is a reg only.
NFA member - right?

Coach, Tom Basso wrote a pamphlet but I can't remember if it was for the merc or CBOT. You might try emailing them.

Call the CME and ask them to send you a copy of their booklet, How to Become a CTA. It is a great little book that they will send you for free.

Also look at http://www.iasg.com and other tracking / alternative investment allocator websites for more info.

Best,
Jake

the series 30 manual mentions a lot but it is all legalese.
I know that CTA's can handle discretionary accounts while brokers need 2 year or NFA exemption. Some CTAs write newsletters, some just have it for the fun of it.

All in all still right now you can write software and disseminate advice (pseudo) as long as disclaimer is there and you are an "expert".
CTA does not mean that much more...I guess.

Tradingcoach,

In general, CTAs are money managers. Some of the more reputable systems vendors register as CTAs as well. A CTA is very different from a broker, though like the rest of the financial services world, the lines between the roles of sales, execution services, and trading advice is often blurry. This is especially the case with full sevice brokers that have account executives that dispense some form of trading advice. Most of these type of people are not CTAs but rather APs (Associated Persons).

A brief review of the NFA website and some alternative investment sites (try Google) might give you a better idea about what the majority of CTAs actually do. It seems you might have a bit of a mistaken impression.

If you want to paint in broad strokes, and you are familiar with the equities world, you can think of a CTA as being much like a hedge fund advisor. Basically they manage client accounts for a fee. The fee is typically in the form of a management fee (a fixed fee of about 2% of account value per year) and an incentive fee (usually about 20% of trading profits).

Sometimes the word "broker" has negative connotations, as many people feel that they don't get a proper amount of value from theirs. Brokers are often derided as middlemen that do little but receive fees. This is sometimes true and sometimes not, but it is a fact that the broker is generally an individual investor's main liason to the trading world and is often a handy person to blame trading losses on. When people are unwilling to take responsiblity for their own actions in the markets, brokers are often the first place the blaming finger points.

CTAs are usually perceived much differently. They typically make no fee from a transaction, have no major conflict of interest with the client, and are paid mainly after making money for the client. CTAs are more likely to be thought of as "traders" rather than financial services sales people. CTAs also tend to have large minimum account sizes and work with more sophisticated investors. Thus they have, on average, a more accountable client base that is less likely to go around saying things like, "that damn CTA lost me money again this month." Another result of this arrangement is that unsophisticated investors, or even sophisticated investors that are not experienced in the futures markets, often don't know what a CTA is.

As a rule, when I hear "broker" I think transaction facilitator / salesperson. When I think "CTA" I think of someone that is either a good trader or won't be around for long as a CTA. One major distinguishing characteristic of a CTA as opposed to a broker is that he is responsible for the performance of his accounts and must show his full track record of trading client accounts to any potential investor. The numbers tend to speak for themselves, as nobody cares about your sales pitch if you consistently lose money.

Hopefully this helps you clarify what a CTA is.

Best,
Jake

it is very much of what I thought. with the side note that there are many CTA's who have zero to manage and they resort to writing newsletters and in the case of one former turtle become IB's.
thanks for the post.