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Commodity Pool Operator (CPO)

Moneyzine Editor
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Moneyzine Editor
1 mins
January 11th, 2024
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Commodity Pool Operator (CPO)

Definition

The term commodity pool operator refers to an individual or organization that is responsible for soliciting funds and investing those funds in futures and options contracts. Participating in commodity pools allows investors to gain leverage while reducing risk.

Explanation

Also referred to as managed futures funds, commodity pool is a legal term defined by the National Futures Association, which provides the following definition:

"A commodity pool operator (CPO) is an individual or organization that operates a commodity pool and solicits funds for that commodity pool. A commodity pool is an enterprise in which funds contributed by a number of persons are combined for the purpose of trading futures or options on futures, retail off-exchange forex contracts, or swaps, or to invest in another commodity pool."

Commodity pools can be compared to mutual funds since they allow individual investors to pool their assets and conduct trades that would otherwise not be possible. Since the investor's funds can be spread over a larger number of trades, commodity pools can also reduce risk through diversification. A commodity pool operator will both solicit funds from investors as well as make investment decisions on behalf of the pool. A CPO may also hire a Commodity Trading Advisors (CTA) to make those investment decisions, which include futures, options, forex contracts, and swaps.

Related Terms

  • COMEX (Commodity Exchange, Inc.)
    COMEX (Commodity Exchange, Inc.)
    The term COMEX refers to a market where buyers and sellers can negotiate and enter into commodity futures contracts involving metals. COMEX was originally acquired by the NYMEX, which is part of CME Group.
    Moneyzine Editor
    Moneyzine Editor
    January 11th, 2024
  • Commodity Pool (Managed Futures Funds)
    Commodity Pool (Managed Futures Funds)
    The term commodity pool refers to an enterprise consisting of individual investors combining their funds to trade in futures contracts and options as a single entity. Commodity pools allow investors to gain leverage while reducing risk.
    Moneyzine Editor
    Moneyzine Editor
    January 11th, 2024
  • Commodity Trading Advisors (CTA)
    Commodity Trading Advisors (CTA)
    The term commodity trading advisor refers to an individual or organization that provides advice to a pool of investors in futures contracts and commodity options. Commodity trading advisors are regulated by the Commodity Futures Trading Commission as well as the National Futures Association.
    Moneyzine Editor
    Moneyzine Editor
    January 11th, 2024
  • Commodity Futures Trading Commission (CFTC)
    Commodity Futures Trading Commission (CFTC)
    The term Commodity Futures Trading Commission refers to an organization responsible for fostering open, transparent, competitive, and financially sound markets. The Commodity Futures Trading Commission is an independent governmental organization.
    Moneyzine Editor
    Moneyzine Editor
    January 11th, 2024

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