Forex Managers – Forex Hedge Fund Managers
There are many different types of forex managers who pursue many different types of forex trading strategies, either through forex managed accounts or through the forex hedge fund structure. This article will attempt to discuss forex managers (and forex hedge fund managers) in general. If you have any specific questions, please feel free to contact us.
Who are Forex managers?
In general forex managers are people who have developed (or follow) a strategy to make money in the off-exchange foreign currency markets.
What types of backgrounds do forex managers have?
Unlike “traditional” money managers, forex managers do not necessarily come from wall street or from a brokerage house. This does not mean, however, that these managers do not run highly skilled investment programs.
Many forex managers were previously employed outside of the financial industry and traded in the forex markets for themselves on the side – managers like this have often found a program that works and want to allow their friends, family and other investors participate in the investment program and potential gains. Many times forex managers come to forex as a way to achieve investment returns which do not correlate to the general securities markets. Some forex managers have developed complex mathematical programs (often termed “Forex Robots”) that will automatically trade their invesmtne program. Some managers have relatively less experience in managing money and will act as a kind of sponsor of the forex hedge fund – participating in the business aspects of the hedge fund like raising assets.
Many forex managers will have at least a college degree and some will also have a Masters in Business Administration (MBA). Some forex managers will be former professionals such as doctors or lawyers. It is also common to see a forex manager with a third party designation like a Chartered Financial Analyst (CFA) which is bestowed by the CFA Institute, however there are not really any forex specific designations.
Are there any exam or qualification requirements to be a forex manager or to run a forex hedge fund?
Currently there are no federal requirements or regulations necessary to be a forex manager or to run a forex hedge fund. It is expected, however, that forex managers will need to register with the CFTC and will need to become members of the NFA. Please see NFA Discusses New Forex Registration for more information on potential federal forex registration. If forex registration rules are passed, it is likely that the forex manager will need to have both a Series 3 and a Series 34 license.
At the state level, state investment advisor and forex laws may require a forex manager to registered as commodity trading advisors or commodity pool operators with the CFTC, even though such registration is not required at the federal level. The state investment advisor laws may also be broad enough to require the manager to register as an investment advisor at the state level. This is definitely a complicated issue and one which a start up forex manager would need to discuss with a forex lawyer. If you would like to discuss these issues with our lawyers, please contact us.
If a forex manager was required to be registered as an investment advisor, he would likely need to have the Series 65 exam license or the Series 7 and Series 66. Depending on the extent of the forex hedge fund’s money raising activities, the forex manager may need to have the Series 7 and the fund, or the forex management company, would need to be registered as a broker-dealer.
Is there anything forex managers cannot do?
Generally a forex manager can mold the forex hedge fund’s investment program as he sees fit. However there are two specific items to note. First, the manager should be careful when trading that he stays within the description of the trading program. Especially in these very volatile times, investors are very aware of style drift and managers should be very cognizant of this. For example, if a forex manager says he will only trade the majors, he should not stray from this even if he sees an “opportunity” for a nice gain.
Second, the hedge fund manager cannot violate any laws while trading. The federal securities laws (specifially the Commodities Exchange Act) apply to forex hedge fund managers who are not registered . In addition to out and out fraud, the manager should not engage in any activities which he is not sure is legal. If there are any questions, the hedge fund manager should consult a forex attorney.
What are the common qualities of hedge fund managers?
The number one commonality between hedge fund managers is a desire to see their program and ideas come to fruition. Another trait which is common to hedge fund managers is a very strong work ethic.
Start up hedge fund managers
If you are a start up forex manager, you will first need to discuss the forex fund formation process with a hedge fund attorney. Please contact us to discuss your situation today.
Other relevant forex legal articles include:
- Forex Disclosure Documents
- Forex Hedge Fund Risks
- Introducing Brokers and Forex Introducing Brokers
- Forex Trading Agreements
- Overview of State Regulation of Forex
- Forex Dealer Member
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