Investor's wiki
en English
Navigation
Home Glossary
InvestingStocksBondsCryptoPersonal FinanceFundamental AnalysisTechnical AnalysisTradingBankingTaxes
Disclaimer Terms of Use Privacy Policy Cookie Policy
Navigation
Home Glossary
InvestingStocksBondsCryptoPersonal FinanceFundamental AnalysisTechnical AnalysisTradingBankingTaxes
Disclaimer Terms of Use Privacy Policy Cookie Policy

Qualified Eligible Participant (QEP)

Qualified Eligible Participant (QEP)
TradingTrading StrategiesAdvanced Trading Strategies and InstrumentsAdvanced Strategies and Instruments

What Is a Qualified Eligible Participant (QEP)?

A qualified eligible participant (QEP) is an individual who meets the requirements to trade in sophisticated investment funds, for example, futures and hedge funds. These requirements are defined by Rule 4.7 of the Commodity Exchange Act (CEA).

Figuring out Qualified Eligible Participants (QEPs)

Qualified eligible participants (QEPs) must meet a set of conditions portrayed by the Commodity Exchange Act.

  • They must possess somewhere around $2 million in securities and different investments, as well as something like $200,000 in initial margin and option premiums for commodity interest transactions.
  • They must have had an open account with a futures commission merchant (FCM) whenever during the first six months.
  • They must have a combined portfolio of the investments determined in the above requirements.

QEPs are viewed as more educated than the common investor in regards to sophisticated investments. Hedge funds, for instance, are perceived to be less secure than mutual funds, pension funds, and other investment vehicles. They are obligated to see huge losses yet produce higher-than-normal long-term returns when effective. Hedge fund managers go long on assets they foresee will truly do well from now on, while shorting assets they expect will fall in price.

By law, a majority of hedge fund participants must be QEPs. Hedge funds that limit their investors just to QEPs might get an exemption from several Securities and Exchange Commission (SEC) regulations. This exemption permits hedge fund managers more extensive scope in their investment choices, which opens the door for both more huge risks and rewards than different types of investments.

Hedge funds are faulted by a larger number of people for adding to the 2007-2008 Financial Crisis by adding hazardous, influence based derivatives to the banking system. These investments made high returns when the market was great, yet enhanced the impact of the market's decline.

QEPs versus Accredited Investors and CPOs

Qualified eligible participants are like accredited investors in that the two of them must meet specific income and net worth requirements. The difference is that QEPs are assumed to have a sophisticated comprehension of the intricacies of trading hazardous assets, for example, futures and hedge funds.

Individuals who receive funds to use in a commodity pool, for example, a hedge fund are required to register as Commodity Pool Operators (CPO). CPOs must consent to the disclosure requirements of both the Commodity Exchange Act and the Commodity Futures Trading Commission. While investors in hedge funds must be QEPs, hedge fund managers must be both QEPs and CPOs.

Highlights

  • A QEP must possess no less than $2,000,000 of securities and different investments, have an open account with a FCM for no less than six months, and have a portfolio that has no less than $200,000 of initial margin and option premiums for commodity interest transactions.
  • A qualified eligible participant is an individual who meets the requirements to trade in various investment funds, for example, futures and hedge funds.
  • QEPs are like, yet not equivalent to, accredited investors in that they are assumed to have a sophisticated comprehension of the intricacies of trading dangerous assets, for example, futures and hedge funds.