CFTC

CFTC Issues COVID-19 Customer Advisory on Commodity ETPs and Funds

CFTC - AdvisoryWashington, D.C. — The Commodity Futures Trading Commission today issued a Customer Advisory informing the public about the unique risks associated with certain trading vehicles that use futures contracts or other commodity interests as they make investment decisions during the COVID-19 (coronavirus) pandemic. This is the third Customer Advisory the CFTC has issued in response to the pandemic and is a joint product of the Office of Customer Education and Outreach (OCEO) and the Division of Swap Dealer and Intermediary Oversight (DSIO).

The CFTC has observed that recent market volatility due to the pandemic has prompted many investors to purchase shares of trading vehicles that use futures contracts or other commodity interests, either in hopes of profiting from a recovery in particular commodity prices or as a means of diversifying their portfolios. These trading vehicles may be organized as exchange-traded products (ETPs) or mutual funds, but that does not necessarily mean they will behave like traditional exchange-traded funds (ETFs) or mutual funds that invest in stocks, bonds or other asset classes.  For example, these vehicles might not provide investors opportunities to “buy the dip” or profit from long-term price gains in the underlying commodity.

“Now more than ever, it is important for Main Street investors to understand how our futures markets work when they go to evaluate their investment choices,” said DSIO Director Joshua Sterling. “This advisory highlights important characteristics of retail commodity pools, in service of the CFTC’s core value of providing clarity to market participants.”

“The CFTC is committed to providing pertinent information to help customers make sound investment decisions,” added CFTC Chief Communications Officer and Director of Public Affairs Michael Short.

About the Office of Customer Education and Outreach

OCEO is dedicated to helping customers protect themselves from fraud or violations of the Commodity Exchange Act through the research and development of effective financial education materials and initiatives. OCEO engages in outreach and education to retail investors, traders, industry organizations, and the agricultural community. The office also frequently partners with federal and state regulators as well as consumer protection groups. The CFTC’s full repository of customer education materials can be found at: cftc.gov/LearnAndProtect.

The Customer Advisory is available in full below and on the CFTC’s coronavirus webpage:  cftc.gov/coronavirus.