What is a Commodity Pool Operator (CPO)

A Commodity Pool Operator (CPO) is a person or organization that manages a commodity pool, and a commodity pool is a fund that receives contributions from a number of investors in order to gain leverage when investing in commodity futures contracts (commodity futures contract- a standardized contract to buy or sell a specific commodity, like corn or crude oil, at a certain date in the future at market price).   Commodity pools give relatively small investors an opportunity to take part in a larger investment, which they normally would not have access to, in this respect they are very similar to a mutual fund.  An advantage to being apart of CPO is that the risk is spread among multiple investors, so if the investment does not go as projected, then the strength of the group will be able to cover the loss without too much hardship.  In the same regard, when a return comes to fruition all participants in the investment share in the profits, and many times the profit is substantial enough to make the venture worth the effort.  Another advantage to being a part of a CPO is they are given a special tax status.  With a CPO 60 percent of the gains and losses are treated as a long-term capital gains, and 40 percent are treated as short-term capital gains.  One major difference between a commodity pool and a mutual fund is that a mutual fund is open to the public, while a commodity pool is a closed investment opportunity that is considered private enterprise and includes only a handpicked group of investors.  One cannot join a commodity pool without written approval from the other investors.  Even with its strict barriers to entry, the CPO fund industry has grown to over 350 billion dollars in size and is expected to surpass one trillion dollars in managed assets over the next seven years. 
    
Commodity Pool Operators are regulated by the Commodity Futures Trading Commission (CFTC), which was created by congress in 1974 as an independent agency to monitor the trading of commodity futures and option markets in the United States.  In late 2000 congress passed an act that instructed the Securities and Exchange Commission (SEC) to join forces with CFTC to regulate single stock futures, which weren't traded until November of 2002.  The National Futures Association (NFA) was created in 1982 as a self-regulatory organization to provide the CFTC with some additional oversight.  In recent news President Obama has criticized the Commodity Futures Trading Commission (CFTC) about loopholes in their regulation and lack of transparency, which has contributed to soaring prices of crude oil.  In June of 2008 the house passed a bill that required the CFTC to take steps to detour excessive speculation in the energy futures market.