Posted By: Ilan Levy-Mayer Vice President, Cannon Trading Futures Blog
By: John Thorpe, Cannon Trading Senior Broker
A data source that escapes many futures traders and should be reviewed if you are a serious position trader are the reports compiled on a weekly basis by our chief regulator, The Commodity Futures Trading Commission CFTC. These reports offer insight into market imbalances, liquidity, and large bank, both domestic and international, participation. I encourage all traders, even day traders, to familiarize yourself with these reports as they provide a salient view of market structure given a particular futures contract as the structure changes over time.
1) BPR’s “Bank Participation Rate” reports which, by open interest you can view market imbalances. Bank Participation Rate Webpage
Another report compiled by the CFTC is the:
2) Net position changes. The Large Trader Net Position Changes and the Trading Account Net Position Changes data provides the public with a view of the amount of trading that results in net changes to positions at the trader level and at the account level. Net Position Changes Webpage
3) COT reports provide a breakdown of each Tuesday’s open interest for futures and options on futures markets in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC. Commitment of Traders Report Webpage
Below is an example of the COT Report Webpage.
Commitments of Traders (COT) Reports Descriptions
Introduction and Classification Methodology
The Commodity Futures Trading Commission (Commission or CFTC) publishes the Commitments of Traders (COT) reports to help the public understand market dynamics. Specifically, the COT reports provide a breakdown of each Tuesday’s open interest for futures and options on futures markets in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC.
The COT reports are based on position data supplied by reporting firms (FCMs, clearing members, foreign brokers and exchanges). While the position data is supplied by reporting firms, the actual trader category or classification is based on the predominant business purpose self-reported by traders on the CFTC Form 40 and is subject to review by CFTC staff for reasonableness. CFTC staff does not know specific reasons for traders’ positions and hence this information does not factor in determining trader classifications. In practice this means, for example, that the position data for a trader classified in the “producer/merchant/processor/user” category for a particular commodity will include all of its positions in that commodity, regardless of whether the position is for hedging or speculation. Note that traders are able to report business purpose by commodity and, therefore, can have different classifications in the COT reports for different commodities. For one of the reports, Traders in Financial Futures, traders are classified in the same category for all commodities.
Due to legal restraints (CEA Section 8 data and confidential business practices), the CFTC does not publish information on how individual traders are classified in the COT reports.
Generally, the data in the COT reports is from Tuesday and released Friday. The CFTC receives the data from the reporting firms on Wednesday morning and then corrects and verifies the data for release by Friday afternoon.
Types of Reports
There are four main reports:
- Traders in Financial Futures
The Legacy reports are broken down by exchange. These reports have a futures only report and a combined futures and options report. Legacy reports break down the reportable open interest positions into two classifications: non-commercial and commercial traders.
The Supplemental report includes 13 select agricultural commodity contracts for combined futures and options positions. Supplemental reports break down the reportable open interest positions into three trader classifications: non-commercial, commercial, and index traders.
The Disaggregated reports are broken down by agriculture, petroleum and products, natural gas and products, electricity and metals and other physical contracts. These reports have a futures only report and a combined futures and options report. The Disaggregated reports break down the reportable open interest positions into four classifications:
- Swap Dealers
- Managed Money
- Other Reportables
Please see the “Disaggregated Explanatory Notes” for further information.
The Traders in Financial Futures (TFF) report includes financial contracts, such as currencies, US Treasury securities, Eurodollars, stocks, VIX and Bloomberg commodity index. These reports have a futures only report and a combined futures and options report. The TFF report breaks down the reportable open interest positions into four classifications:
- Asset Manager/Institutional
- Leveraged Funds
- Other Reportables
Please see the “Traders in Financial Futures Explanatory Notes” for further information.
Short and Long Format of Reports
The Legacy and Disaggregated reports are available in both a short and long format. The TFF report is only available in the long format. The Supplemental report is only available in the short format.
The short format shows reportable open interest and week-to-week open interest changes separately by reportable and non-reportable positions. For reportable positions, additional data is provided for commercial and non-commercial holdings, spreading (in certain categories only), changes from the previous report, percent of open interest by category, and numbers of traders.
The long report, in addition to the information in the short report, groups the data by crop year, where appropriate, and shows the concentration of positions held by the largest four and eight traders.
IMPORTANT PLEASE NOTE:
Trading commodity futures and options involves substantial risk of loss.
The recommendations contained in this letter is of opinion only and does not guarantee any profits.
These are risky markets and only risk capital should be used.
Past performance is not necessarily indicative of future results.