CFTC Form 40 Statement of Reporting Trader

CFTC FORM 40

STATEMENT OF REPORTING TRADER

NOTICE:  Failure to file a report required by the Commodity Exchange Act (“CEA” or the “Act”)¹ and the regulations thereunder,² or the filing of a report with the Commodity Futures Trading Commission (“CFTC” or “Commission”) that includes a false, misleading or fraudulent statement or omits material facts that are required to be reported therein or are necessary to make the report not misleading, may (a) constitute a violation of § 6(c)(2) of the Act (7 USC 9, 15), § 9(a)(3) of the Act (7 USC 13(a)(3)), and/or § 1001 of Title 18, Crimes and Criminal Procedure (18 USC 1001) and (b) result in punishment by fine or imprisonment, or both.

PRIVACY ACT NOTICE

The Commission’s authority for soliciting information from traders with large futures, option, swap, or other derivatives market positions is granted in sections 4a, 4i, 4t and 8 of the CEA (see 7 U.S.C. §§ 6i and 12). The Commission’s authority for soliciting information from volume threshold account controllers, persons who own volume threshold accounts, reportable sub-account controllers, and persons who own reportable sub-accounts is granted in sections 4i and 8 of the CEA and related regulations (see, e.g., 17 CFR § 18.04(b)). Such entities and individuals are required to provide the information requested, and failure to comply may result in the imposition of criminal or administrative sanctions (see, e.g., 7 U.S.C. §§ 9 and 13a-1, and/or 18 U.S.C. 1001).

The information requested is most commonly used in the Commission’s market and trade practice surveillance activities to (a) provide information concerning the size and composition of the commodity derivatives markets, (b) permit the Commission to monitor and enforce speculative position limits and (c) enhance the Commission’s trade surveillance data.  Information contained in these records may be used by the Commission in the conduct of investigations or litigation and, in limited circumstances, may be made public in accordance with provisions of the CEA and other applicable laws. It may also be disclosed to other government agencies and to contract markets to meet responsibilities assigned to them by law. In accordance with the Privacy Act and the Commission’s rules thereunder (see 17 CFR § 146), the complete listing of uses of the information contained in these records is found in the Commission’s System of Records Notices, available on www.cftc.gov.  These uses include CFTC-15, Large Trader Report Files (Integrated Surveillance System).

Information contained in these records may be used by the Commission in the conduct of investigations or litigation and, in limited circumstances, may be made public in accordance with provisions of the CEA and other applicable laws. It may also be disclosed to other government agencies and to reporting markets to meet responsibilities assigned to them by law.

GENERAL INSTRUCTIONS

Who Must File a Form 40 – 17 CFR § 18.04(a) requires every person who owns or controls a reportable position to file a Form 40 – Statement of Reporting Trader with the Commission. 17 CFR § 18.04(b) requires every volume threshold account controller, person who owns a volume threshold account, reportable sub-account controller, and person who owns a reportable sub-account to file a Form 40 – Statement of Reporting Trader with the Commission. 17 CFR § 20.5 requires every person subject to books or records under 17 CFR § 20.6 to file a 40S filing³ with the Commission.

When to file – A reporting trader must file a Form 40 on call by the Commission or its designee.

Where to file – The Form 40 shall be filed by submitting the completed form to the nearest CFTC office or as otherwise instructed by the Commission or its designee. Generally, a Form 40 should be submitted via the CFTC’s web-based Form 40 submission process at [www.cftc.gov]. If submission attempts fail, the reporting trader shall contact the Commission at [techsupport@cftc.gov] for further technical support.

When to update – A reporting trader must update and maintain the accuracy of its Form 40 profile information on the CFTC’s web-based Form 40 portal, as directed by the Commission or its designee in a special call, by periodically visiting the portal to review, verify, and/or update this information.

Signature – Each Form 40 submitted to the Commission must be signed or otherwise authenticated by either (1) the reporting trader submitting the form or (2) an individual that is duly authorized by the reporting trader to provide the information and representations contained in the form.

What to File – All reporting traders that are filing a Form 40 pursuant to either 17 CFR § 18.04(a) (i.e. reportable position reporting traders) or 17 CFR § 20.5 (i.e. swaps books and records reporting traders) must complete all questions. All reporting traders that are filing a Form 40 pursuant to 17 CFR § 18.04(b) (i.e. volume threshold account controllers, persons who own a volume threshold account, reportable sub-account controllers, and persons who own a reportable sub-account reporting trader) must complete all questions unless they are natural persons. Reporting traders that are filing a Form 40 pursuant to 17 CFR § 18.04(b) who are natural persons shall mark not applicable for questions 7 and 8.

Please be advised that pursuant to 5 CFR § 1320.5(b)(2)(i), you are not required to respond to this collection of information unless it displays a currently valid OMB control number.

TABLE OF CONTENTS

1. General information for Reporting Trader

2. Contact Information for Individual Responsible for Trading Activities

3. Contact Information for Individual Responsible for Risk Management Operations

4. Contact information for Individual Responsible for Information on the Form 40

5. Omnibus Account Identification

6. Foreign Government Affiliation

7. Non-Domestic Entity Indicator

8. Ownership Structure (Parent/Parents)

9. Ownership Structure (Subsidiary/Subsidiaries)

10. Control of Reporting Trader’s Trading Activities by Others

11. Control of Other’s Trading Activities by Reporting Trader

12. Commodity Index Trading Indicator

13. Swap Dealer Identification

14. Major Swap Participant Identification

15. Business Sectors, Subsectors and Occupation

16. Commodities Being Traded in Derivative Markets

17. Business Purpose for Trading in Derivative Markets

18. Signature/Authentication, Name, and Date

ACKNOWLEDGEMENT OF DEFINITIONS

Before proceeding with your submission, please check this box to indicate that you have read the definitions for the following terms – as they are used in the Form 40: 

Commodity (or commodities) – generally, all goods and articles (except onions and motion picture box office receipts, or any index, measure, value, or data related to such receipts), and all services, rights, and interests (except motion picture box office receipts, or any index, measure, value, or data related to such receipts) in which contracts for future delivery are presently or in the future dealt in (see 7 USC 1a(9)).

Commodity index Trading (“CIT”) – means:

1. An investment strategy that consists of investing in an instrument (e.g., a commodity index fund, exchange-traded fund for commodities, or exchange-traded note for commodities) that enters into one or more derivative contracts to track the performance of a published index that is based on the price of one or more commodities, or commodities in combination with other securities; or

                                                             

2. An investment strategy that consists of entering into one or more derivative contracts to track the performance of a published index that is based on the price of one or more commodities, or commodities in combination with other securities.

Control – as used in this Form, “control” means to actually direct, by power of attorney or otherwise, the trading of a special account or a consolidated account. A special account or a consolidated account may have more than one controller.

Derivatives – futures, options, swaps, and swaptions.

Omnibus volume threshold account - means any trading account that, on an omnibus basis, executes or receives via allocation or give up, reportable trading volume on or subject to the rules of a reporting market that is a board of trade designated as a contract market under § 5 of the Act or a swap execution facility registered under § 5h of the Act.

Parent – for purposes of Form 40, a person is a parent of a reporting trader if it has a direct or indirect controlling interest in the reporting trader; and a person has a controlling interest if such person has the ability to control the reporting trader through the ownership of voting equity, by contract, or otherwise.

Person – an individual, association, partnership, corporation, trust, or government agency and/or department.

Reportable sub-account – means any trading sub-account of an omnibus volume threshold account or omnibus reportable sub-account, which sub-account executes reportable trading volume.

Reportable sub-account controller – means a natural person who by power of attorney or otherwise actually directs the trading of a reportable sub-account. A reportable sub-account may have more than one controller.

Reportable trading volume – means contract trading volume that meets or exceeds the level specified in 17 CFR § 15.04.

Reporting trader – a person who must file a Form 40, whether pursuant to 17 CFR § 18.04(a), 17 CFR § 18.04(b), or 17 CFR § 20.05.

Subsidiary – for purposes of Form 40, a person is a subsidiary of a reporting trader if the reporting trader has a direct or indirect controlling interest in the person; and a reporting trader has a controlling interest if such reporting trader has the ability to control the person through the ownership of voting equity, by contract, or otherwise.

Volume threshold account – means any trading account that executes, or receives via allocation or give up, reportable trading volume on or subject to the rules of a reporting market that is a board of trade designated as a contract market under § 5 of the Act or a swap execution facility registered under § 5h of the Act.

Volume threshold account controller – means a natural person who by power of attorney or otherwise actually directs the trading of a volume threshold account. A volume threshold account may have more than one controller.

CFTC FORM 40

General Information for Reporting Trader:

For question 1, please provide the name, contact information and other requested information regarding the reporting trader. If the reporting trader is an individual, provide their full legal name and the name of the reporting trader’s employer.

1. Indicate whether the reporting trader is a legal entity or a natural person:

Legal entity: □

Natural person: □

Name of Reporting Trader

Street Address

City

State

Country

Zip/Postal Code

Phone Number

Email Address

Website

NFA ID (if any)

Legal Entity Identifier (if any)

Name of Employer

Employer NFA ID (if any)

Employer Legal Entity Identifier (if any)

Contact Information:

For questions 2, 3, and 4, provide the name and contact information as requested.

2. Individual to contact regarding the derivatives trading of the reporting trader (this individual should be able to answer specific questions about the reporting trader’s trading activity when contacted by Commission staff):

Check here if this individual has the same contact information as that of the reporting trader.

Name

Street Address

City

State

Country

Zip/Postal Code

Phone Number

Email Address

NFA ID (if any)

3. Individual to contact regarding the risk management operations of the reporting trader (this individual should be able to answer specific questions about the reporting trader’s risk management operations, including account margining, when contacted by Commission staff):

Check here if this individual has the same contact information as that of the reporting trader.

Name

Street Address

City

State

Country

Zip/Postal Code

Phone Number

Email Address

NFA ID (if any)

4. Individual responsible for the information on the Form 40 (this individual should be able to verify, clarify, and explain the answers submitted by a reporting trader on the Form 40):

Check here if this individual has the same contact information as that of the reporting trader.

Name

Street Address

City

State

Country

Zip/Postal Code

Phone Number

Email Address

NFA ID (if any)

Omnibus Account Identification:

For question 5, indicate whether the reporting trader has a customer omnibus account with a futures commission merchant, clearing member, or foreign broker (NOTE: For the purpose of this question, an omnibus account is an account that one futures commission merchant, clearing member or foreign broker carries for another in which the transactions of multiple individual accounts are combined. The identities of the holders of the individual accounts are not generally known or disclosed to the carrying firm. In addition, the Commission has traditionally identified omnibus accounts as either house or customer omnibus accounts. House omnibus accounts exclusively contain the proprietary accounts of the omnibus account originator. Customer omnibus accounts contain the accounts of customers of the omnibus account originator. It is the obligation of the omnibus account originator to correctly identify the omnibus account type to the reporting entity):

5. Does the reporting trader have a customer omnibus account with a futures commission merchant, clearing member, or foreign broker? YES/NO

IF YES, Give the name(s) of the futures commission merchant, clearing member, or foreign broker carrying the account(s) of the reporting trader.

Foreign Government Affiliation:

For question 6, please complete the following (NOTE: For the purpose of this question, affiliation can include, but is not limited to, a situation (1) where the foreign government directly or indirectly controls the reporting trader’s assets, operations, and/or derivatives trading, or (2) where the reporting trader operates as a direct or indirect subsidiary of a foreign government, its agencies or departments, or any investment program of the foreign government):

6. Is the reporting trader directly or indirectly affiliated with a government other than that of the United States? YES/NO

IF YES, give the name of the government(s).

IF YES, explain the nature of the affiliation between the reporting trader and the government(s) listed above.

Non-Domestic Entity Indicator.

For question 7, if the Reporting Trader is a legal entity, please complete the following.

7. Is the reporting trader organized under the laws of a country other than the United States? YES/NO

IF YES, give the name of the country or countries under whose laws the reporting trader is organized.

Ownership Structure of the Reporting Trader:

For questions 8 and 9, provide the requested ownership information only as applicable.

If the Reporting Trader is a commodity pool, also provide the requested information in questions 8i, 8ii, and 8iii. If the Reporting Trader is reporting commodity pools in which it has an ownership interest, also provide the requested information in questions 9i, 9ii, and 9iii.

8. List all the parents of the reporting trader (including the immediate parent and any parent(s) of its parent) and, separately, all persons that have a 10 percent or greater ownership interest in the reporting trader (commodity pool investors are deemed to have an ownership interest in the pool). For each such parent or 10 percent or greater owner include the following information:

Indicate whether the party identified below is a legal entity or a natural person:

Legal entity: □

Natural person: □

Name

Street Address

City

State

Country

Zip/Postal Code

Phone Number

Website

Email Address

NFA ID (if any)

Legal Entity Identifier (if any)

Parent Company/10% Owner/ or Both Indicator

8i. For each person identified in question 8 that is a limited partner, shareholder, or other similar type of pool participant, indicate if they are a principal or affiliate of the operator of the commodity pool.

Principal/Affiliate Indicator

8ii. For each person identified in question 8 that is a limited partner, shareholder, or other similar type of pool participant, indicate if they are also a commodity pool operator of the pool.

Commodity Pool Operator Indicator

8iii.  For each person identified in question 8 that is a limited partner, shareholder, or other similar type of pool participant and where the operator of the commodity pool is exempt from registration under §4.13 of the Commission’s regulations, indicate if that person has an ownership or equity interest of 25 percent or greater in the commodity pool.

25% Ownership Indicator

9. List all the subsidiaries of the reporting trader (including the immediate subsidiary and any subsidiaries of those subsidiaries) and, separately, all persons in which the reporting trader has a 10 percent or greater ownership interest (including a 10 percent or greater interest in a commodity pool(s)). Only list subsidiaries and persons that engage in derivatives trading. For each such subsidiary and/or person include the following information:

Indicate whether the party identified below is a legal entity or a natural person:

Legal entity: □

Natural person: □

Name

Street Address

City

State

Country

Zip/Postal Code

Phone Number

Website

Email Address

NFA ID (if any)

Legal Entity Identifier (if any)

Subsidiary/10% Ownership/ or Both Indicator

9i. For each person identified in question 9 that is a commodity pool and for which you are a limited partner, shareholder or other similar type of pool participant, indicate if you are a principal or affiliate of the operator of the commodity pool.

Principal/Affiliate Indicator

9ii. For each person identified in question 9 that is a commodity pool and for which you are a limited partner, shareholder or other similar type of pool participant, indicate if you are the commodity pool operator for the pool.

Commodity Pool Operator Indicator

9iii. For each person identified in question 9 that is a commodity pool and for which you are a limited partner, shareholder or other similar type of pool participant and for which the operator of the commodity pool is exempt from registration under §4.13 of the Commission’s regulations, indicate if you have an ownership or equity interest of 25 percent or greater in the commodity pool.

25% Ownership Indicator

Control of Trading:

For questions 10, 11, 12, and 13 provide the requested control information only as applicable.

10. List all persons outside of the reporting trader that control some or all of the derivatives trading of the reporting trader (including persons that may have been previously identified as a parent, above):

Indicate whether the party identified below is a legal entity or a natural person:

Legal entity: □

Natural person: □

Name

Street Address

City

State

Country

Zip/Postal Code

Phone Number

Website

Email Address

NFA ID (if any)

Legal Entity Identifier (if any)

Some/All Indicator

11. List all persons for which the reporting trader controls some or all of the derivatives trading (including persons that may have been previously identified as a subsidiary, above):

Indicate whether the party identified below is a legal entity or a natural person:

Legal entity: □

Natural person: □

Name

Street Address

City

State

Country

Zip/Postal Code

Phone Number

Website

Email Address

NFA ID (if any)

Legal Entity Identifier (if any)

Some/All Indicator

12. List any other person(s) that directly or indirectly influence, or exercise authority over, some or all of the trading of the reporting trader, but who do not exercise “control” as defined in this Form:

Indicate whether the party identified below is a legal entity or a natural person:

Legal entity: □

Natural person: □

Name

Street Address

City

State

Country

Zip/Postal Code

Phone Number

Website

Email Address

NFA ID (if any)

Legal Entity Identifier (if any)

Some/All Indicator

13. Is some or all of the derivatives trading of the reporting trader subject to an express or implied agreement or understanding with any other person(s) not addressed in questions 10, 11, or 12, above? YES/NO

If yes, provide the following information:

Indicate whether the party identified below is a legal entity or a natural person:

Legal entity: □

Natural person: □

Name

Street Address

City

State

Country

Zip/Postal Code

Phone Number

Website

Email Address

NFA ID (if any)

Legal Entity Identifier (if any)

Some/All Indicator

Commodity Index Trading Indicator:

For question 14, please answer the following:

14i. Is the reporting trader engaged in commodity index trading as defined in paragraph (a) of the definition of CIT above? YES/NO

14ii. Is the reporting trader engaged in commodity index trading as defined in paragraph (b) of the definition of CIT above? YES/NO

1. If the reporting trader is engaged in CIT (as defined in paragraph (b)) with respect to one or more commodities or commodity groups appearing on Supplemental List II, indicate whether the reporting trader is, in the aggregate, pursuing long exposure or short exposure with respect to such commodities or commodity groups.  It is not necessary to respond to this question with respect to CIT that tracks the performance of multiple unrelated commodities or commodity groups (e.g., an investment in an exchange-traded fund that tracks the performance of an index representing commodities spanning multiple commodity groups).

14iii. If the reporting trader is currently engaged in commodity index trading as defined in paragraphs (a) or (b) of the CIT definition above, indicate the month and year on which the reporting trader first became engaged in commodity index trading.

Swaps Participation Indicators

For questions 15 and 16, please indicate if the reporting trader meets the specified definition:

15. Is the reporting trader a Swap Dealer, as defined in § 1.3(ppp) of regulations under the Commodity Exchange Act? YES/NO

16. Is the reporting trader a Major Swap Participant, as defined in § 1.3(qqq) of regulations under the Commodity Exchange Act? YES/NO

Nature of Business and of Derivatives Trading Activities:

For questions 17, 18, and 19 provide the requested information only as applicable.

17. Select all business sectors and subsectors that pertain to the business activities or occupation of the reporting trader. If more than one business subsector is selected, indicate which business subsector primarily describes the nature of the reporting trader’s business.

Choose from Supplemental List I

18. Select all commodity groups and individual commodities that the reporting trader presently trades or expects to trade in the near future in derivative markets.

Choose from Supplemental List II

19. For each selected individual commodity identified in question 18, indicate the business purpose(s) for which the reporting trader uses derivative markets. If the reporting trader has more than one business purpose for trading in an individual commodity, also indicate the predominant business purpose.

Choose from Supplemental List III

Signature/Authentication, Name, and Date

20. Please sign/authenticate the Form 40 prior to submitting.

Signature/ Electronic Authentication:

□ By checking this box and submitting this form (or by clicking “submit,” “send,” or any other analogous transmission command if transmitting electronically), I certify that I am duly authorized by the reporting trader identified below to provide the information and representations submitted on this Form 40, and that the information and representations are true and correct.

Reporting Trader Authorized Representative (Name and Position):

____________________ (Name)

____________________ (Position)

Submitted on behalf of:

____________________ (Reporting Trader Name)

Date of Submission:

____________________

Supplemental List I: List of Business Sectors and Subsectors

Business Sector

Subsector

Agriculture and Forestry

Oilseed Farming

Grain Farming

Fruit and Tree Nut Farming

Other Crop Farming (Specify)

Cattle Ranching and Farming

Hog and Pig Farming

Poultry and Egg Production

Sheep and Goat Farming

Other Animal Production

Forestry, Logging, or Timber Production

Cooperative

Other (Specify)

Mining, Oil and Natural Gas Extraction

Oil Exploration/Production

Natural Gas Exploration/Production

Coal Mining

Precious Metal Mining

Non-Precious Metal Mining

Other (Specify)

Utilities

Utility/Cooperative

Electric Power Generation

Local Distribution Company

Natural Gas Distribution

Other (Specify)

Construction

Building Construction

Heavy and Civil Engineering Construction

Other (Specify)

Manufacturing, Refining and Processing

Animal Food Manufacturing

Grain Milling

Oilseed Milling

Sugar and Confectionery Product Manufacturing

Fruit and Vegetable Preserving and Specialty Food Manufacturing

Dairy Product Manufacturing

Animal Slaughtering and Processing

Bakeries

Other Food Manufacturing

Beverage Manufacturing Textile Mills

Textile Product Mills

Apparel Manufacturing

Wood Product Manufacturing

Paper Manufacturing

Pulp, Paper, and Paperboard Mills

Petroleum and Coal Products Manufacturing

Renewable Fuels Manufacturing

Petrochemical/Chemical Manufacturing

Plastics and Rubber Products Manufacturing

Natural Gas Processing

Precious Metal Processor/Smelter

Non-Precious Metal Processor

Metals Fabricator

Other (Specify)

Wholesale Trade

Lumber and Other Construction Materials Merchant Wholesalers

Metal and Mineral Merchant Dealer

Grocery and Related Product Merchant Wholesaler

Farm Product Raw Material Merchant Wholesalers

Chemical and Allied Products Merchant Wholesalers

Petroleum and Petroleum Products Merchant Wholesalers

Natural Gas, Power Marketer

Importer/Exporter (specify commodities)

Other (Specify)

Retail Trade

Building Materials and Supplies Dealers

Food and Beverage Stores

Jeweler/Precious Metals Retailer

Vehicle Fuel Retailer/Convenience Store Operator

Fuel Dealers

Other (Specify)

Transportation and Warehousing

Air Transport

Trucking

Pipeline Transportation of Crude Oil

Pipeline Transportation of Natural Gas

Farm Product Warehousing and Storage

Energy Distributor (warehousing, storage)

Other (Specify)

End User (NOTE: May not be the only/primary subsector selected)

Metals End User (Construction Co., Brass Mill, Steel Mill)

Emissions End User (Factory, Industrial Cos.)

Petroleum End User (Airline Cos. Municipalities, Industrial Cos., Trucking Cos.)

Information

Other (Specify)

Financial Institutions and Investment Management

Dealers and Financial Intermediaries

Broker/Dealer

Bank Holding Company

Investment/Merchant Bank

Non-US Commercial Bank

US Commercial Bank

Swaps/Derivatives Dealer

Universal Bank

Asset/Investment/Fund Management

Asset/Investment Manager

Institutional Clients

Retail Clients

Managed Accounts and Pools (CTAs, CPOs, etc.)

Institutional Clients

Retail Clients

College Endowment, Trust, Foundation

Fund of Hedge Funds

Hedge Fund

Mutual Fund

Pension Fund

Private Wealth Management

Private Bank

Exchange Traded Fund Issuer

Exchange Traded Note Issuer

Government Financial Institution

Central Bank

Sovereign Wealth Fund

Government Sponsored Enterprise (GSE)

Other Governmental Entity (Specify)

Other Financial or Trading Entities

Arbitrageur

Individual Trader/Investor

Floor Broker

Floor Trader

Market Maker

Proprietary Trader

Corporate Treasury

Mortgage Originator

Savings Bank

Credit Union

Insurance Company

Other (Specify)

Real Estate

Other (Specify)

Arts, Entertainment, and Recreation

Performing Arts Companies

Promoters of Performing Arts

Agents and Managers for Artists and Entertainers

Independent Artists, Writers, Performers

Other (Specify)

Accommodation and Food Services

Food Services

Other (Specify)

Public Administration

Administration of Environmental Quality Programs

Administration of Economic Programs

Other (Specify)

Supplemental List II: Commodity Groups and Individual Commodities

Commodity Group

Individual Commodity

GRAINS

OATS

WHEAT

CORN

RICE

LIVESTOCK/MEAT PRODUCTS

LIVE CATTLE

PORK BELLIES

FEEDER CATTLE

LEAN HOGS

DAIRY PRODUCTS

MILK

BUTTER

CHEESE

OILSEED AND PRODUCTS

SOYBEAN OIL

SOYBEAN MEAL

SOYBEANS

FIBER

COTTON

FOODSTUFFS/SOFTS

COFFEE

FROZEN CONCENTRATED ORANGE JUICE

SUGAR

COCOA

OTHER AGRICULTURAL

REAL ESTATE

CURRENCY

EQUITIES AND EQUITY INDICIES

INTEREST RATES

TREASURY COMPLEX

OTHER INTEREST RATE PRODUCTS

OTHER FINANCIAL INSTRUMENTS

PETROLEUM AND PRODUCTS

JET FUEL

ETHANOL

BIODIESEL

FUEL OIL

HEATING OIL

GASOLINE

NAPHTHA

CRUDE OIL

DIESEL

NATURAL GAS AND PRODUCTS

NATURAL GAS LIQUIDS

NATURAL GAS

ELECTRICITY AND SOURCES

COAL

ELECTRICITY

URANIUM

PRECIOUS METALS

PALLADIUM

PLATINUM

SILVER

GOLD

BASE METALS

STEEL

COPPER

WOOD PRODUCTS

LUMBER

PULP

CHEMICALS

PLASTICS

EMISSIONS

WEATHER

OTHER (SPECIFY)

Supplemental List III: Business Purposes of Commodity Derivatives Trading

Business Purpose

Definition

Example

Offsetting Cash or Spot Market Input Price Risk

Using derivative markets for commodities that are direct inputs or purchases for your business so as to offset price risk associated with your purchase of these inputs.

E.g. You are a grain processor, so you use wheat futures to offset the price risk incidental to your cash purchases of wheat.

Offsetting Cash or Spot Market Output Price Risk

Using derivative markets for commodities that are direct outputs or sales of your business so as to offset price risk associated with your sale of these outputs.

E.g. You are a gasoline refiner, so you use gasoline futures to offset price risk associated with your production of gasoline.

Offsetting Other Cash or Spot Market Price Risks (Cross Price Risk)

Using derivative markets for a commodity that is not a direct input or output of your business, but which has significant price correlations with the direct inputs or outputs of your business.

E.g. You manufacture ethanol which is used as an additive in and competitor for gasoline as a combustive fuel. While you neither directly consume nor produce gasoline, you may find that the price you receive for your ethanol product is highly correlated with the price of gasoline, and therefore you reduce ethanol price risk by using gasoline futures contracts.

Other Physical Risk Management Strategies

Managing other price risks incidental to the operation of your business or physical assets through the use of commodity derivative markets.

E.g. You are a manufacturer with significant international sales, so you use foreign currency futures to offset risks associated with changes in the competitiveness of your exports and therefore the value of your physical assets such as production plants, land, machinery, etc.

Client Futures/Options Trading

Fulfilling customer/client desire for portfolio diversification or exposure to various asset classes through your activity as a Commodity Pool Operator, Commodity Trading Advisor, or other similar role.

E.g. You collect funds and execute trading strategies through the use of futures/options markets at the expressed intent and for the sole benefit of clients.

Managing Client Swaps Exposure

Reducing risk stemming from holding or executing swaps contracts on behalf of clients or customers through the use of futures/options markets.

E.g. You sell crude oil swaps to a client and agree to accept the risk inherent in the index price. You offset this risk through purchases of crude oil futures, in effect transferring price risk from the client to another market participant.

Making Markets/Providing Liquidity

Engaging in derivatives transactions to assume risk and help transfer ownership of derivative positions from one market participant to another, realizing the bid-ask spread as the return.

E.g. You accept risk by buying and selling futures/options contracts so that other traders can move into and out of positions when they wish. You then find other traders willing to take the other side of those transactions.

Arbitrage

Using derivative markets as part of a strategy designed to realize risk-free profit from pricing anomalies.

E.g. You realize that the wheat futures contract is trading at a discount (even after considering storage, transport, etc.) relative to the wheat cash price, and therefore find it profitable to purchase the wheat futures contract, take delivery, and then resell the wheat in the cash market for a risk-free profit.

Establishing Price Exposure

Using derivative markets as a way to express your belief in the future movement of market prices. This strategy does not involve offsetting risks incidental to your business, but instead involves directional trading.

E.g. You conduct research and believe that crude oil prices are due to rise, so you take long futures positions in crude oil to profit from your predictions.

Financial Asset Management

Using derivatives to diversify, rebalance, or otherwise allocate financial assets so that risks to the value of the investment portfolio are reduced. This strategy is used by entities such as pension funds and endowments to manage overall risk to their financial portfolios.

E.g. You hold Treasury bonds as a component of your investment portfolio, and use futures contracts to reduce overall portfolio risk that would result from falling bond prices.

Managing Proprietary Swaps Exposure

Reducing risk stemming from your proprietary holding or execution of swaps contracts through the use of futures/options markets.

E.g. You trade interest rate swaps as part of your business or investment strategy, and offset some of the risk inherent in those swaps through your use of Eurodollar futures markets.

Other: Specify

List and explain your business purpose if the above categories do not adequately describe the reason you trade in a particular commodity derivative market.

1 7 U.S.C. section 1, et seq.

2 Unless otherwise noted, the rules and regulations referenced in this notice are found in chapter 1 of title 17 of the Code of Federal Regulations; 17 CFR Chapter 1 et seq.

3 As used in this document, “Form 40” may refer to either a Form 40 – Statement of Reporting Trader or a 40S Filing, as appropriate, and as the context may require.

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