Investing Assets & Markets Commodities Learn What an IB, AP, CTA, and CPO Are in Commodities By Andrew Hecht Andrew Hecht Twitter Andrew Hecht is an expert in commodities trading, with 35+ years of experience researching, evaluating, and executing significant trades. He publishes widely on investing and commodities trading. He is currently the Editor-in-Chief at Optionhotline.com. learn about our editorial policies Updated on March 29, 2022 Reviewed by Andy Smith Fact checked by Vikki Velasquez In This Article View All In This Article Introducing Broker FCMs and APs Commodity Trading Advisor Commodity Pool Operator Regulation of Futures Photo: Thomas Barwick / Getty Images In the world of futures markets, there are many career paths for people who are experts in trading, executing, margining, settling, brokering, and even managing client funds that invest in these markets. The Commodity Futures Trading Commission (CFTC) requires registration via the National Futures Association (NFA) for many of these roles and organizations, such as futures commission merchants (FCMs). Expert positions like these allow the complex duties that are involved in futures trading to be separated into many discrete tasks, which in turn creates efficiency within the industry. Here we take a closer look at a few of these roles, and what parts of the futures market they manage. Learn about the introducing broker (IB), the associated person (AP), the commodity trading advisor (CTA), and the commodity pool operator (CPO). Introducing Broker The introducing broker (IB) is a professional broker that deals in futures, forex, commodity options, and swaps. The IB often has a direct relationship with a client. The IB does not make the trades, but rather delegates the client's futures orders to a futures commission merchant (FCM), or to a retail foreign exchange dealer for execution, clearing, and settlement. The role of the IB increases efficiency in these types of trades in that it allows the IB to focus on client needs, while the FCM can work on execution, trading, and floor operations. Note The IB receives a commission for orders directed toward the FCM. An IB can work for one or more FCMs. Futures Commission Merchant and Associated Persons A futures commission merchant (FCM) or related futures firm employs an associated person (AP) to carry out a client's orders. APs are involved in a number of duties. They solicit or facilitate a client's futures orders, maintain discretionary accounts, and take part in the futures markets in other ways as well. Discretionary accounts are those where an AP will have final say over buying and selling futures for a client. These accounts must have written power of attorney to comply with market regulations. Having power of attorney allows them to trade commodities without having to consult with the clients each time. In most cases, all the people who work for FCMs must also register with the NFA as APs. Commodity Trading Advisor A commodity trading advisor (CTA) can be a single person or a firm. CTAs provide individualized advice about the buying or selling of futures contracts, options on futures contracts, or certain foreign exchange contracts. While a CTA acts like a financial advisor, the role is unique to trading in products on futures exchanges. As with APs, a CTA often has discretion over the funds that clients deposit. This means they can buy and sell commodities that they manage as they see fit. CTAs must abide by certain rules around how they report their trades, as per the CFTC. Commodity Pool Operator Like the CTA, a commodity pool operator (CPO) can also be a single person or a firm. A CPO solicits and receives funds from clients to invest in commodity futures, options on futures, and any vehicles that trade on commodity futures exchanges in aggregate. A CPO puts client funds in a pool and then invests these funds in one central account, thus pooling that capital. While a CTA and CPO have a lot in common, the CFTC has specific rules that set the two apart. In short, a CTA does not hold funds, but only directs them on behalf of clients. A CPO holds funds and invests them. Regulation of Futures All of these professionals who work in the futures markets must pass a proficiency test given by the NFA. That exam is the Series 3 exam. Some experts vying for these roles may be exempt from taking the exam, so long as the CFTC approves it. The rules around commodity futures trading and brokering dates back to the 1970s. This is around the time when retail investors became active in futures markets and Congress created the CFTC. Over time, the CFTC has expanded the regulatory requirements for all professionals involved in these markets. Note Futures markets have a high degree of leverage. Therefore, the chance to make major gains has drawn many investors and traders in recent decades. But when there is a high profit potential, there always exists the chance of major losses as well. The rules that govern futures trading have a number of functions. First, they make sure professionals have the knowledge to do their jobs, and that they are acting in good faith. Second, the rules protect clients. Lastly, they create standards in an attempt to create a level playing field for all who take part in the market. The CFTC has five commissioners that serve staggered five-year terms. They are nominated by the president and confirmed by the Senate. There is a limit that no more than three commissioners from the same political party can serve at the same time. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Commodity Futures Trading Commission. "Understand Your Contractual Obligations." ManagedFunds.org. "Commodity Trading Advisor & Commodity Pool Operator 101," Page 4. National Futures Association. "Futures and Forex Proficiency Examinations FAQs." National Futures Association. "NFA History."