Because futures contracts are exchange-traded instruments, CTAs need to satisfy the rules and restrictions put forth by these exchanges. One of these rules pertains to the amount of collateral or margin that a party to a futures contract must put up: the margin requirement. The amount of initial margin is the amount of cash or Treasury bills that must be in an account at a broker or futures commission merchant (FCM) in order to initiate a trade in a specific futures contract. Minimum initial margins are set by the exchanges for each futures contract. This initial margin, which is generally only a small percentage of the notional value of the futures contract, is related to the volatility of the assets underlying the futures contract and can change over time. More volatile contracts require larger margins. Futures exchanges have the ability to change margin requirements at any time. Margin requirements are often increased after a sharp rise in prices or price volatility. Exhibit 31.1 displays the initial margin and maintenance margin requirements for selected futures contracts as of March 1, 2012. The maintenance margin, which is typically lower than the initial margin, is the amount of margin required to carry previously initiated positions. If a customer's margin account drops below the level required for the maintenance margin, then the customer has to add funds to restore the margin account to the level of the initial margin.

EXHIBIT 31.1 Initial and Maintenance ...

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