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 such as futures and hedge funds. These requirements are defined by Rule 4.7 of the Commodity Exchange Act (CEA).

Under🔴standing Qꩲualified Eligible Participants (QEPs)

Qualified eligible participants (QEPs) must meet🍷 a set of conditions described by tꦆhe Commodity Exchange Act.

• They must own at least $2 million in 澳洲幸运5官方开奖结果体彩网:securities and other investments, as well as at least $200,000 in initial margin and option premiums for commodity interest transactions.
• They must have had an open account with a 澳洲幸运5官方开奖结果体彩网:futures commission merchant (FCM) at any time during the preceding six months.
• They must have a combined portfolio of the investments specified in the above requirements.

QEPs are considered to be more knowledgeable than the typical investor regarding sophisticated investments. Hedge funds, for example, are understood to be riskier than 澳洲幸运5官方开奖结果体彩网:mutual funds, 澳洲幸运5官方开奖结果体彩网:pension funds, and other investment vehicles. They are liable to see significant los🌳ses but produce higher-than-average long-term returns when successful. Hedge fund managers go long on assets they predict will do well in the future, while shorting assets they anticipate will fall in price. 

By law, a plurality of hedge fund participants must be QEPs. Hedge funds that limit their investors only to QEPs may obtain an exemption from several 澳洲幸运5官方开奖结果体彩网:Securities and Exchange Commission (SEC) regulations. This exemption allows hedge fund managers more co🦋nsiderable latitude in their investment decisions, which opens the door for both more significant risks and rewards than other types of investments.

Hedge funds are blamed by many for contributing to the 澳洲幸运5官方开奖结果体彩网:2007-2008 Financial Crisis by adding risky, leverage-based d💎erivatives to the banking system. These investments created high returns when the market was good, but ampli🦄fied the impact of the market's decline.

QEPs vs. Accredited Investors and CPOs

Qualified eligible participants are similar to 澳洲幸运5官方开奖结果体彩网:accredited investors in that they both must meet specific income and net worth requirements. The difference is that QEPs are assumed to have a sophisticated understanding of the complexities of trading risky assets such as futures and hedge funds.

Individuals who receive funds to use in a commodity pool such as a hedge fund are required to register as 澳洲幸运5官方开奖结果体彩网:Commodity Pool Operators (CPO). CPOs must comply with the disclosure requirements of both the Commodity Exchange Act and the 澳洲幸运5🧸官方开奖结果体彩网:Commodity Futures Trading Commission. While investors in hedge funds must be QEPs, hedge fund managers must be both QEPs and 💫CPOs.