CFTC expands large-trader financial futures report

The U.S. Commodity Futures Trading Commission said on Thursday it will provide more information on positions held by large traders in financial futures markets, part of its push to boost transparency.

The new data, to be released weekly starting on Friday, "will provide the public with a better view into the financial futures marketplace," said CFTC Chairman Gary Gensler.

The report will cover about 30 markets, a CFTC official said, including interest rates, foreign currency and debt futures.

The new data will be a companion to the CFTC's weekly commitment of traders report, published each Friday, which breaks down open interest by broad commercial and noncommercial categories.

"Anything the CFTC does that improves the transparency and information access to the futures markets for traders is beneficial to participants in the currency markets," said Joseph Trevisani, chief analyst at FX Solutions in Saddle River, New Jersey.

The noncommercial data, particularly in currencies, is currently used as a contrarian indicator, particularly when long and short positions are at historical levels, to show when changes in price direction may occur. To be long a security, currency or commodity is a bet the price will rise, to be short is a bet it will fall.

Nearly all U.S. financial futures are traded at the CME Group, the world's largest futures exchange operator. In the second quarter, CME handled 12.16 million contracts a day, 9.2 million of which were financial futures.

Four Categories

The new report will show open interest by held by four categories of large traders:

  • Sell-side dealers, including large banks;

  • Buy-side asset managers and institutional investors, including pension funds, endowments, insurance companies, mutual funds;

  • Leveraged funds, including hedge funds and other money managers;

  • Other traders who mainly use the market to hedge risk, such as corporate treasuries, central banks, smaller banks and mortgage originators.

The CFTC began issuing similar expanded trader reports for commodity and energy futures last September.

CFTC said similar to this report, the new data will provide a breakdown of each Tuesday's open interest for markets in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC.

A CFTC official said the agency analyzed almost 4,000 traders across the markets using its "Form 40" and other data to determine which of the four categories a trader belongs to, and will soon upgrade its form to provide better data.

The CFTC said it also will make available four years of historical data dating back to June 13, 2006, in a couple of weeks.

Market analysts cautioned that the new format, while providing useful indications of the positions of participants such as hedged or leveraged funds, still suffers the same drawback as the existing reports.

"The main drawback is it is still dated," said Brian Dolan, chief currency strategist at Forex.com in Bedminster, New Jersey. "You see on Friday (data) for four days ago, so you always have to take it with a grain of salt."

[Source: Reuters, New York, 22Jul10]

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