A commodity pool is an investment structure where many individual investors combine their moneys and trade in

futures contract In finance, a futures contract (sometimes called a futures) is a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future, between parties not yet known to each other. The asset ...

s as a single entity in order to gain leverage. They are analogous to

mutual fund A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV ...

s wherein a fund is similarly set up expressly for trading in

equity Equity may refer to: Finance, accounting and ownership * Equity (finance), ownership of assets that have liabilities attached to them ** Stock, equity based on original contributions of cash or other value to a business ** Home equity, the diff ...

, except that mutual funds are open to public subscription whereas commodity pools and

hedge fund A hedge fund is a pooled investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio-construction, and risk management techniques in an attempt to improve performance, such as ...

s are private. Commodity pools are also called "managed futures funds". The name "commodity pool" is a

National Futures Association The National Futures Association (NFA) is the self-regulatory organization (SRO) for the U.S. derivatives industry, including on-exchange traded futures, retail off-exchange foreign currency (forex) and OTC derivatives ( swaps). NFA is headquar ...

(NFA) legal term. In the

United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., federal district, five ma ...

, the

Commodity Futures Trading Commission The Commodity Futures Trading Commission (CFTC) is an independent agency of the US government created in 1974 that regulates the U.S. derivatives markets, which includes futures, swaps, and certain kinds of options. The Commodity Exchange Act ...

(CFTC) and the NFA, as opposed to the

Securities and Exchange Commission The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street Crash of 1929. The primary purpose of the SEC is to enforce the law against mark ...

, regulate commodity pools. Many hedge funds are commodity pools. Funds that trade in commodities, which include many of the largest funds engaged in macro-strategies, are registered with the Commodity Futures Trading Commission as commodity pools and as

commodity trading advisor A commodity trading advisor (CTA) is US financial regulatory term for an individual or organization who is retained by a fund or individual client to provide advice and services related to trading in futures contracts, commodity options and/or ...

s (CTAs). In an address to the Securities Industry Association in 2004, Sharon Brown-Hruska, acting director of the CFTC, said that 65 of the top 100 funds in 2003 were commodity pools, and 50 out of the 100 largest hedge funds were CTAs in addition to being commodity pools.Sharon Brown-Hruska's 2003 speech to the Commodity Futures Trading Commission
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References

{{DEFAULTSORT:Commodity Pool Commodity markets

See also

References