NEW YORK (HedgeWorld.com)–The U.S. Commodity Futures Trading Commission announced a temporary exemption from registering for traders that meet certain criteria, giving hedge funds easier access to futures markets.
Some hedge fund managers have already filed for no-action relief that for now releases them from having to register as commodity pool operators and commodity trading advisers.
Moreover, the CFTC is reviewing separate proposals from the National Futures and Managed Funds associations that would permanently expand exemptions but do so on different grounds. The Commission will solicit comments on these proposals through Jan. 13, 2003.
These new rules have been in the works for years, said Mike Griffin, the head of New York-based Dorsey & Whitney’s hedge fund practice. But now that the proposals are out, industry people are hoping to get new exemptions on the books before too long, once the comments come in.
The CFTC wants more people in this market, commented Robert Leonard, who leads the New York-based Bryan Cave hedge fund practice. The previous rules kept some hedge fund managers out by imposing onerous requirements even on funds that did a little futures trading. The burden was substantial, said Jeffrey Cobb of Cobb & Eisenberg, Southport, Conn. For example, principals of a firm had to take a commodities exam. “The community has been waiting for something like this for a long time,” Mr. Cobb said, “That funds can get the benefit of the rule by simply filing for no action is a very positive position for the CFTC to take.”
Mr. Leonard advises hedge fund operators to stay with their current status if they are already registered but to take advantage of the no-action relief if they are starting out new. Law firms have been filing for their clients to get the temporary exemption. The change may make life easier for people interested in using the new single-stock futures and other instruments.
There is a basic difference in approach between the MFA and NFA proposals. Which one will emerge as the accepted version is not yet clear. The attorneys take the fact that CFTC asked for comment on both proposals as indication that much is on the table. There could be serious tweaking of requirements on the basis of comments received.