CFTC to Begin Releasing New Commitments of Traders Reports on US Futures Markets

A step in the right direction for sure.

A much needed enhancement would be to report the five largest position holders in key markets, on the long and short side over a certain size limit on a weekly basis.

Release: 5710-09
For Release: September 2, 2009

CFTC Implements New Transparency Efforts to Promote Market Integrity

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it will begin implementing new transparency efforts outlined in a July 7, 2009, statement by CFTC Chairman Gary Gensler. Starting Friday, September 4, 2009, the CFTC will begin disaggregating the data in its weekly Commitments of Traders (COT) reports and begin releasing, on a quarterly basis, data collected from an ongoing special call on swap dealers and index traders in the futures markets.

“A core mission of the CFTC is to promote market transparency,” CFTC Chairman Gary 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, September 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.”

Commitments of Traders (COT) Reports

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 1920’s, 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.

Beginning Friday, September 4, 2009 (for data as of September 1, the CFTC will publish 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 improve upon the existing reports by breaking the data into four categories of traders: Producer/Merchant/Processor/User; Swap Dealers; Managed Money; and Other Reportables.

The CFTC intends to produce the same disaggregated data on all of the remaining physical commodity markets for which we currently publish COT data. The agency will continue to also release the traditional COT reports for a transition period until at least the end of 2009. This will allow the public to become familiar with the new reports as well as comment to the CFTC as to any further possible enhancements (Comments should be submitted via email to secretary@cftc.gov by October 1, 2009). The CFTC also plans to soon release three years of historical data for the new report.

The CFTC also is 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, described above.

The CFTC is concurrently working on improvements to the agency’s Form 40 and other methodologies to improve the accuracy of trader classifications.

See Disaggregated COT Explanatory Notes under Related Documents for additional information.

Index Investment Data

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 our special call authority. The CFTC continued this special call and enhanced the information disseminated in the September report. Starting Friday, September 4, 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.

Martin Hennecke: Protecting Your Wealth in Volatile Markets

"Hennecke stressed that investors should go for physical forms of gold and other
precious metals rather than "paper gold investment scheme where there isn't full
backing, where the metal might be leased out or used for derivatives. That's
crucial because there is 80 times more paper gold in the market than actual
physical metal in existence in the planet."

For the most part alternative currency trades remain 'highly specialized' investments, not often seen in the 401k, IRA, or the average brokerage account.

If gold and silver go mainstream, which they often will do in times of crisis of confidence, the rally may be rather impressive on short covering alone. Expect the exchanges to invoke special rules to allow for settlement of delivery obligation in cash or kind rather than bullion, and at artificially low, albeit significantly higher, prices.

But this may not help those who are holding gold in 'custodial accounts' where the same gold has been lent out to the market and sold, or is loosely mingled with multiples of uncertain ownership.

Can't happen? Who would have thought that one of the largest retail commodity brokerages, Refco, could roll over? Counter party risk is always an issue when you are 'off-exchange.'

“The desire of gold is not for gold. It is for the means of freedom."
Ralph Waldo Emerson

Go for Gold and Silver: Strategist
By CNBC
Wednesday, 2 Sep 2009 2:44 AM ET

China's key stock index recovered its poise on Tuesday, rising nearly 0.5 percent after diving 6.7 percent the day amid liquidity concerns and worries that lending growth may slow in the country. In August alone, the Shanghai Composite lost nearly 22 percent, snapping a seven-month winning streak.

If those stock gyrations are hard to stomach, there are other investment options to help ride out the wild swings in China, according to Martin Hennecke, associate director at Tyche.

For one, Hennecke liked convertible bonds in China, saying he is bullish on the Chinese economy given its fundamental strength, compared to Europe and the U.S. (No thank you for now, its a bubble and a bit less than free market environment, even given its bawdy good time with capitalism over the past ten years. - Jesse)

"Valuation is not as cheap anymore compared to the beginning of the year. Hong Kong-listed China companies are slightly cheaper than (those in) Shanghai," Hennecke said on CNBC Asia's "Protect Your Wealth". " One who plays more cautiously -- convertible bonds in China are an option."

Gold and silver ranked among Hennecke's top recommendations, as China, the world's largest gold buyer this year, is likely to buy more of the yellow metal going forward.

"Whether we see a further crisis or a recovery globally, with inflation coming back up again...gold should do quite well and it hasn't risen much this year yet," said Hennecke.

Hennecke stressed that investors should go for physical forms of gold and other precious metals rather than "paper gold investment scheme where there isn't full backing, where the metal might be leased out or used for derivatives. That's crucial because there is 80 times more paper gold in the market than actual physical metal in existence in the planet."

Hennecke also preferred exposure to direct agricultural commodities, as opposed to investing in commodities through equities, where markets have already rallied sharply.

"Agricultural commodity prices are similar to precious metals. (Prices) across board are mostly dropping, apart from sugar and a few items. So direct commodities are quite undervalued and quite cheap now," he explained. "Agricultural prices are likely to rise quite substantially."

Hennecke expected the investment environment to be volatile, as the U.S. will be saddled with a massive debt load over the next ten years.

"It's tricky to see where stock markets are heading, it depends on how fast inflation feeds through as a result of the debt problems." (Precisely correct, except for those who prefer to see what they have already decided *should* happen. They are often wrong, but rarely uncertain. - Jesse)

Russian Professor Panarin Sees US Following the Russian Collapse Model

Forecasts based on social outcomes are an 'iffy' thing because of the enormous amount of exogenous variables.

This particular forecast made some time ago is important, not because this professor may be more right or wrong than any other 'soft forecaster,' but because a signficant portion of America's major creditors, those outside the US, hear this and find it to be credible.

Professor Igor Panarin, whose book The Crash of America is just out, now claims that by November the book will be yesterdays news because the events described in it will have alrady come to pass.

We are not so gloomy or certain in our own outlook, and tend to discount the statements made by authors on book tours. But we do find ourselves drawn to the example of the financial decline of the Soviet Union as more probable for the US than other possible outcomes, such as the lingering malaise of Japan. It would be ironic and instructive if both Cold War behemoths eventually foundered after their many years of epic effort and wasted spending on their military complexes and regional wars.

It has never been more apparent that Obama must show leadership, or like his predecessor Mr. Bush, must find a galvanizing event to bring a badly needed focus to his presidency. One can see his Administration reaching for that one issue to distract from the awful financial problems: health care reform, swine flu preparations, whatever might bring some focus on action to a majority party in disarray with a rookie at the helm.

They had their opportunity with the financial crisis, but were hopelessly put off track by hidden scandal, conflicts of interest, a corrupt campaign contributions process, and of course, too many chiefs of inadequate stature who tended to pull down and smother the seasoned leaders able to have a vision and implement it such as Paul Volcker.

Robert Reich presented a nice apologia for the Democrats on Health Care Reform the other day, and it was credible. He is one of the few members of the Clinton Administration for whom we have enduring respect for his intelligence and integrity. Why he has no position in the current Administration is puzzling indeed.

The problem is that such internal diffusion absolutely cries out for a leader like a Franklin Roosevelt to bring some energy and action to the diversity of ideas.

A scary thought perhaps, given the weighting of alumni of the Clintons and Wall Street in this Administration, absolutely marked by a lack of 'outsiders.'

Obama is approaching his administration like a community organizer, trying to build consensus and look for 'local' leaders to take up the challenge when he leaves. But this is not how a leader functions in moments of crisis.

"A leader is one who knows the way, goes the way, and shows the way."
John C. Maxwell

Perhaps when the autumn television shows begin their debuts, the chief American idol may find his task a little less onerous as distraction and forgetfulness sets in once again at the United States of Amnesia. Wall Street is counting on it, and as only Benmosche has dared to articulate, yearns to tell the Congress, the regulators, and the public to 'shove it.' After all, its a well-established principle on the Street that you get to 'eat what you kill,' and the would be oligarchs are hungry.

Rumour du Jour - a Large US Bank Is In Trouble

As they say on the financial infomercial channels, "US equities appear to be out of favor today."

There are rumours swirling the trading desks that a large US bank is in trouble, and will need some help getting itself re-organized.

The name Wells Fargo has been mentioned, and there is an associated six percent drop in the stock, with a groundswell of put option activity. It does seem like a 'setup' to us. There are also rumours that Cerberus is in trouble (and there is plenty of smoke on that one.)

There is a contrary view that this is a 'setup' to suck in the shorts and help to trigger a massive rally when the Jobs numbers are reported on Friday.

There is a flight to safety into the dollar and treasuries, but interestingly enough also gold and silver, as 'investors' exit US stocks.

So far we are holding a key support level around 995 on the SP futures, and we tend to discount most rumours that make it to bubblevision rather heavily. If there is any real news it should come out in the evening.

Let's see what happens. We're hedged to the short side which is where we have been coming into the day, anticipating a pullback to key support. We're there now.

There was 'good news' today, and the market ignored it and went sharply lower. That may be significant but it is too soon to tell for sure. A breakdown in equities from here would be more significant to our minds.

In sum, this is a highly manipulated market, full of speculation and hot money. The Obama Administration is failing badly to reform the US financial system, and so here we are, trading on hot money and rumours.