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CFTC's Disaggregated COT Data Goes Live

Taking the outline from Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler's comments in early July, the commission said it began implementing new commodity market transparency efforts Friday by disaggregating the data in its weekly Commitments of Traders (COT) reports and releasing, on a quarterly basis, data collected from an ongoing special call on swap dealers and index traders in the futures markets.

On July 7 Gensler directed the Commission's staff to "improve" the COT reports in a number of ways aimed at providing more detailed information on the different categories of market participants and their actions (see NGI, July 13). Beginning Sept. 4 for data as of Sept. 1, the CFTC was to begin publishing additional COT data for 22 contract markets, including major agriculture, energy and metals markets. The COT reports currently break traders into two broad categories: commercial and noncommercial. The new reports will break the data into four categories of traders: Producer/Merchant/Processor/User; Swap Dealers; Managed Money; and Other Reportables.

The Commission kept its word. The new COT report (see chart) for activity through Sept. 1 revealed that of the commercial trader category's 129,352 net long positions, swaps traders accounted for an astounding 99% of the total while producers, merchants, processors and users accounted for the remaining 1%. Of the noncommercial category's 169,846 net short positions, the managed money segment accounted for 82% while "other reportables" made up 18% of the category.

"A core mission of the CFTC is to promote market transparency," Gensler said. "Last September the CFTC recommended disaggregating our weekly Commitments of Traders reports. In July I announced that we would also periodically release data on index investors' participation in the commodity futures markets. I am pleased that as of Friday, Sept. 4, we will be able to take these steps toward increased transparency. For the first time we will break out managed money and swaps in our COT reports and release information on index investment to give the public a better of view of trading activity in the futures markets."

For decades the CFTC has provided the futures industry with COT reports consisting of aggregated large-trader position data to shed light on the changing composition of the markets. The reports are based on a request by Congress for an annual report, upon passage of original enabling legislation in the 1920s, and have been intensified over time into weekly reports in several formats and a weekly Commodity Index Supplement for 12 agricultural markets, begun in January 2007.

The CFTC said it intends to produce the same disaggregated data on all of the remaining physical commodity markets for which it currently publishes COT data. During a transition period at least through the end of 2009, the agency will continue to release the traditional COT reports as well, which will allow the public to become familiar with the new reports as well as comment to the CFTC on any further possible enhancements The CFTC also plans to soon release three years of historical data for the new report.

The Commission said it is also working to create a new COT for all of the financial markets in a form that will improve the transparency of those markets. The categories of this new financial COT may be different from those being applied to the physical markets. The agency is concurrently working on improvements to the agency's Form 40 and other methodologies to improve the accuracy of trader classifications.

In addition to disaggregating the CFTC's COT reports, the agency will begin periodically releasing data on index investment in the commodity futures markets. In September 2008 the CFTC published a report on swap dealers and index traders that was based on data received from a special call authority. The CFTC continued this special call and enhanced the information disseminated in the September report. Starting Friday the agency will begin releasing the data on a quarterly basis with a goal of eventually releasing this data monthly.

The new data will include both gross long and gross short positions and will update data in the previously released report to include some additional data.

"We are constantly looking for ways to improve our transparency efforts to best serve the American public," Gensler added. "We will continue to update the processes by which we report data to the public and market participants with a goal of promoting market transparency."

Comments on the new COT reports should be submitted via e-mail to COTchanges@cftc.gov by Oct. 1.

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