C.O.T
INTRODUCTION
COT (Commitments Of
Traders) is a report published every Friday by the Commodity Futures
Trading Commission (CFTC) of the U.S.A. Government. Based on the previous
Tuesday data, it helps to understand how different types of investors (take a
stand) make their choices about the American futures. We have essentially two
kinds of investors: institutional and private investors. The institutional
investors can be divided into two categories again: managers and
speculators.
To sum up the future traders are:
1. Non
Commercials
Large speculators
such as the hedge funds
2. Commercials
Large
managers who oftentimes determine the stock market trend, because of the large
volumes they handle. They tell us which direction the market is taking.
3.
Non
Reportable
Private
investors or small traders
SMALL GLOSSARY
Commitments of Traders Report :
A weekly report from the CFTC providing 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. Open interest is broken
down by aggregate commercial, non-commercial, and non-reportable holdings. See
below “The Commitments of Traders Report (COT)”.
Open
Interest: The total number of futures contracts long or short in a delivery month
or market that has been entered into and not yet liquidated
by an offsetting transaction or fulfilled by delivery. Also
called Open Contracts or Open Commitments.
Reporting Level: Sizes of positions set by the exchanges and/or the CFTC at or above
which commodity traders or brokers who carry these accounts must make daily reports
about the size of the position by commodity, by delivery month, and whether the
position is controlled by a commercial or non-commercial trader. See below CFTC
Backgrounder: The CFTC’s
Large Trader Reporting System.
Commercial: An entity
involved in the production, processing, or merchandising of a commodity.
http://www.cftc.gov/opa/glossary/opaglossary_co.htm
The Commitments
of Traders Report
The first Commitments
of Traders (COT) report was published for 13 agricultural commodities as of
June 30, 1962. At the time, this report was proclaimed as "another step
forward in the policy of providing the public with current and basic data on
futures market operations." Those original reports were compiled on an
end-of-month basis and were published on the 11th or 12th
calendar day of the following month.
Over the years, in a
continuous effort to better inform the public about futures markets, the
Commodity Futures Trading Commission has improved the COT in several ways. The
COT report is published more often—switching to mid-month and month-end in
1990, to every 2 weeks in 1992, and to weekly in 2000.
The COT report is released more quickly—moving the publication to the 6th
business day after the "as of" date (1990) and then to the 3rd
business day after the "as of" date (1992). The report includes more
information—adding data on the numbers of traders in each category, a crop-year
breakout, and concentration ratios (early 1970s) and data on option positions
(1995). The report also is more widely available—moving from a
subscription-based mailing list to fee-based electronic access (1993) to being
freely available on the Commission’s internet website (1995).
The COT reports 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. The weekly reports for Futures-Only Commitments of Traders and
for Futures-and-Options-Combined Commitments of Traders are released
every Friday at 3:30 p.m. Eastern time.
Reports are available in
both a short and long format. The short report shows open interest separately
by reportable and nonreportable positions. For
reportable positions, additional data are provided for commercial and
non-commercial holdings, spreading, changes from the previous report, percents of open interest by category, and numbers of
traders. The long report, in addition to the information in the short report,
also groups the data by crop year, where appropriate, and shows the concentration
of positions held by the largest four and eight traders.
Current and historical Commitments of Traders data are available on the Internet at the Commission’s website: http://www.cftc.gov. Also available at that site are historical COT data going back to 1986
for futures-only reports and to 1995 for option-and-futures-combined reports.
Example
A page from the June 1,
2004, COT report (short format) showing data for the Chicago Board of Trade's wheat
futures contract is depicted below. Explanatory notes follow the table.
|
WHEAT -- FUTURES-ONLY POSITIONS AS OF 06/01/2004 |
||||||||||
|
NONCOMMERCIAL |
COMMERCIAL |
TOTAL |
NONREPORTABLE POSITIONS |
|||||||
|
LONG |
SHORT |
SPREADS |
LONG |
SHORT |
LONG |
SHORT |
LONG |
SHORT |
||
|
(CONTRACTS OF 5,000
BUSHELS)
OPEN INTEREST: 122,975 |
||||||||||
|
COMMITMENTS |
||||||||||
|
29,015 |
29,513 |
9,514 |
67,135 |
60,224 |
105,664 |
99,251 |
17,311 |
23,724 |
||
|
|
||||||||||
|
CHANGES FROM 05/25/2004 CHANGE IN
OPEN INTEREST: -963 |
||||||||||
|
-2,090 |
-3,837 |
-2,472 |
3,005 |
6,132 |
-1,557 |
-177 |
594 |
-786 |
||
|
|
||||||||||
|
PERCENT OF OPEN INTEREST FOR EACH CATEGORY OF
TRADERS |
||||||||||
|
23.6 |
24.0 |
7.7 |
54.6 |
49.0 |
85.9 |
80.7 |
14.1 |
19.3 |
||
|
|
||||||||||
|
NUMBER OF TRADERS IN EACH CATEGORY
(TOTAL TRADERS: 234) |
||||||||||
|
66 |
81 |
54 |
46 |
61 |
150 |
169 |
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Explanatory Notes
Open Interest - Open interest is the total of all futures and/or option contracts entered
into and not yet offset by a transaction, by delivery, by exercise, etc.
The aggregate of all long open interest is equal to the aggregate of all short
open interest. Open interest held or controlled by a trader is referred to as
that trader's position. For the COT Futures & Options Combined
report, option open interest and traders' option positions are computed on a
futures-equivalent basis using delta factors supplied by the exchanges.
Long-call and short-put open interest are converted to long futures-equivalent
open interest. Likewise, short-call and long-put open interest are converted to
short futures-equivalent open interest. For example, a trader holding a long
put position of 500 contracts with a delta factor of 0.50 is considered to be
holding a short futures-equivalent position of 250 contracts. A trader's long
and short futures-equivalent positions are added to the trader's long and short
futures positions to give "combined-long" and
"combined-short" positions.
Open interest, as
reported to the Commission and as used in the COT report, does not include open
futures contracts against which notices of deliveries have been stopped by a
trader or issued by the clearing organization of an exchange.
Reportable Positions - Clearing members, futures commission merchants, and foreign brokers
(collectively called "reporting firms") file daily reports with the
Commission. Those reports show the futures and option positions of traders that
hold positions above specific reporting levels set by CFTC regulations.
(Current Commission reporting levels can also be found at the Commission’s
website noted above.) If, at the daily market close, a reporting firm has a
trader with a position at or above the Commission’s reporting level in any
single futures month or option expiration, it reports that trader’s entire
position in all futures and options expiration months in that commodity,
regardless of size. The aggregate of all traders’ positions reported to the
Commission usually represents 70 to 90 percent of the total open interest in
any given market. From time to time, the Commission will raise or lower the
reporting levels in specific markets to strike a balance between collecting
sufficient information to oversee the markets and minimizing the reporting
burden on the futures industry.
Commercial and
Non-commercial Traders – When an individual
reportable trader is identified to the Commission, the trader is classified
either as "commercial" or "non-commercial." All of a
trader's reported futures positions in a commodity are classified as commercial
if the trader uses futures contracts in that particular commodity for hedging
as defined in the Commission's regulations (1.3(z)). A trading entity generally
gets classified as a "commercial" by filing a statement with the
Commission (on CFTC Form 40) that it is commercially "...engaged in
business activities hedged by the use of the futures or option markets."
In order to ensure that traders are classified with accuracy and consistency,
the Commission staff may exercise judgment in re-classifying a trader if it has
additional information about the trader’s use of the markets.
A trader may be
classified as a commercial in some commodities and as a non-commercial in other
commodities. A single trading entity cannot be classified as both a commercial
and non-commercial in the same commodity. Nonetheless, a multi-functional
organization that has more than one trading entity may have each trading entity
classified separately in a commodity. For example, a financial organization
trading in financial futures may have a banking entity whose positions are
classified as commercial and have a separate money-management entity whose
positions are classified as non-commercial.
Nonreportable Positions - The long and short
open interest shown as "Non reportable Positions" are derived by
subtracting total long and short "Reportable Positions" from the
total open interest. Accordingly, for "Non reportable Positions," the
number of traders involved and the commercial/non-commercial classification of
each trader are unknown.
Spreading - For the futures-only report, spreading measures the extent to which
each non-commercial trader holds equal long and short futures positions. For
the options-and-futures-combined report, spreading measures the extent to which
each non-commercial trader holds equal combined-long and combined-short
positions. For example, if a non-commercial trader in Eurodollar futures holds
2,000 long contracts and 1,500 short contracts, 500 contracts will appear in
the "Long" category and 1,500 contracts will appear in the
"Spreading" category. These figures do not include intermarket spreading, e.g., spreading Eurodollar
futures against Treasury Note futures. [See a further
explanation of "spreading" under the "Old and Other
Futures" caption below.]
Changes in Commitments
from Previous Reports - Changes represent the
differences between the data for the current report date and the data published
in the previous report.
Percent of Open Interest
– Percents are calculated against the total
open interest for the futures-only report and against the total
futures-equivalent open interest for the options-and-futures-combined
report. Percents less than 0.05 are shown as 0.0, and the percents may not add
to exactly 100.0 due to rounding.
Number of Traders - To determine the total number of reportable traders in a market, a
trader is counted only once regardless whether the trader appears in more than
one category (non-commercial traders may be long or short only and may be
spreading; commercial traders may be long and short). To determine the number
of traders in each category, however, a trader is counted in each category in
which the trader holds a position. Therefore, the sum of the numbers of traders
in each category will often exceed the "Total" number of traders in
that market.
Old and Other Futures (long form only) - For selected commodities where there is a
well-defined marketing season or crop year, the COT data are broken down by
"old" and "other" crop years. Table 1 (below) lists those
commodities and the first and last futures of the marketing season or crop
year. In order not to disclose positions in a single future near its
expiration, on the first business day of the month of the last future in an
"old" crop year, the data for that last future are combined with the
data for the next crop year and are shown as "old" crop futures. For
example, in CBOT wheat, where the first month of the crop year is July and the
last month of the prior crop year is May, on May 3, 2004, positions in the May
2004 futures month were aggregated with positions in the July 2004 through May
2005 futures months and shown as "old" crop futures—positions in all
subsequent wheat futures months were shown as "other."
For the "old"
and "other" figures, spreading is calculated for equal long and short
positions within a crop year. If a non-commercial trader holds a long position
in an "old" crop-year future and an equal short position in an "other"
crop-year future, the long position will be classified as "long-only"
in the "old" crop year and the short position will be classified as
"short-only" in the "other" crop year. In this example, in
the "all" category, which considers each trader's positions without
regard to crop year, that trader's positions will be classified as
"spreading." For this reason, summing the "old" and
"other" figures for long-only, for short-only, or for spreading will
not necessarily equal the corresponding figure shown for "all"
futures. Any differences result from traders that spread from an
"old" crop-year future to an "other" crop-year future.
Concentration Ratios (long form only) - The report shows the percents of open interest held
by the largest four and eight reportable traders, without regard to whether
they are classified as commercial or non-commercial. The concentration ratios
are shown with trader positions computed on a gross long and gross short basis
and on a net long or net short basis. The "Net Position" ratios are
computed after offsetting each trader’s equal long and short positions. Thus a
reportable trader with relatively large, balanced long and short positions in a
single market may be among the four and eight largest traders in both the gross
long and gross short categories, but will probably not be included among the
four and eight largest traders on a net basis.
[See Below: Table 1,
Major Markets for Which the COT Data Are Shown by Crop Year.]
Table1
Major Markets for Which the COT Data Are Shown by Crop Year:
|
Market (*) |
First |
Last |
|
CBOT Wheat |
July |
May |
|
CBOT Corn |
December |
September |
|
CBOT Oats |
July |
May |
|
CBOT Soybeans |
September |
August |
|
CBOT Soybean Oil |
October |
September |
|
CBOT Soybean Meal
|
October |
September |
|
CBOT Rough Rice
|
September |
July |
|
KCBT Wheat |
July |
May |
|
MGE Wheat |
September |
July |
|
CME Lean Hogs
|
December |
October |
|
CME Frozen Pork
Bellies |
February |
August |
|
NYBT Cocoa |
December |
September |
|
NYBT Coffee C |
December |
September |
|
NYBT Cotton No.2
|
October |
July |
|
NYBT Frozen Conc Orange Juice |
January |
November |
(*) CBOT:
# # #
Updated April 05,
2006
http://www.cftc.gov/opa/backgrounder/opa-ltrs.htm
|
Backgrounder |
THE CFTC’s
LARGE-TRADER REPORTING SYSTEM
As
a part of its market surveillance program, the Commodity Futures Trading
Commission (Commission) operates a comprehensive system of collecting
information on market participants. Under rules set out in Parts 15, 16, 17,
18, 19, and 21 of the Regulations under the Commodity Exchange Act (CEAct),[1]
the Commission collects market data and position information from exchanges,
clearing members, futures commission merchants (FCMs),
foreign brokers, and traders. The Commission has assigned confidential
reporting numbers to reporting firms and traders to ensure the privacy of the
information they provide. Except under limited circumstances,
the Commission is prohibited (under §8 of the CEAct)
from publicly disclosing any person’s positions, transactions, or trade
secrets.
Clearing-Member
Data. In addition to providing public data
on trading volume, open contracts, futures delivery notices, exchanges of futures
for cash, and prices, exchanges must provide the Commission (under Part 16)
with confidential information on the aggregate positions and trading activity
of each of their clearing members. Each day as of the previous day’s close,
exchanges report each clearing member’s open long and short positions,
purchases and sales, exchanges of futures for cash, and futures delivery
notices. These data are reported separately by proprietary and customer
accounts by futures month and, for options, by puts and calls by expiration
date and strike price. A portion of the clearing-member data for a specific
market might look like this:
Table
1: Clearing-Member Data
|
|
|||||||||
|
Clearing Member |
Account |
Position |
Trades |
Delivery Notices |
Versus Cash |
||||
|
Long |
Short |
Bought |
Sold |
Stopped |
Issued |
Bought |
Sold |
||
|
Firm A |
House |
85 |
0 |
10 |
0 |
0 |
0 |
0 |
0 |
|
Customer |
2450 |
1810 |
475 |
785 |
0 |
0 |
0 |
0 |
|
|
Firm B |
House |
0 |
1990 |
40 |
0 |
0 |
0 |
15 |
0 |
|
Customer |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
|
The
Commission staff use these data to identify large cleared positions, in single
markets or across many markets and exchanges, to audit large-trader reports,
and to identify account aggregation issues.
Clearing-member data,
however, do not identify the beneficial owners of positions. The aggregate
customer position reported for a clearing member may represent a single trader
or numerous traders. Moreover, the data also would not reveal a circumstance
where a single trader controls substantial portions of the customer positions
at more than one clearing member and, therefore, controls a substantial portion
of the market. To address these limitations on clearing-member data, the
Commission has at the heart of its market surveillance program a large-trader
reporting system.
Large-Trader
Data. Market surveillance must assess an
individual trader’s activities and potential power in a market and enforce the
limits on speculative positions. To do this in markets characterized by
substantial numbers of customers trading through intermediaries, the Commission
and the exchanges employ a comprehensive large-trader reporting system (LTRS).
Under the Commission’s LTRS, clearing members, FCMs,
and foreign brokers (collectively called “reporting firms”) file daily reports
with the Commission (under Part 17). Those reports show the futures and option positions of traders that hold
positions at or above specific reporting levels set by the Commission. (A list
of current reporting levels can be found in Part 15 of the Commission’s regulations and at the
Commission’s website.) If, at the daily market close, a reporting firm has a
trader with a position at or above the Commission’s reporting level in any
single futures month or option expiration, the firm reports that trader’s
entire position in all futures and options expiration months in that commodity,
regardless of size.
The aggregate of all
large-traders’ positions reported to the Commission usually represents 70 to 90
percent of the total open interest in any given market. The reporting level for
large-trader reports ranges from 25 contracts to 1000 contracts. The level for
any given market is based on the total open positions in that market, the size
of positions held by traders in the market, the surveillance history of the
market, and, for the physical-delivery markets, the size of deliverable
supplies. From time to time, the Commission will raise or lower the reporting
levels in specific markets to strike a balance between collecting sufficient
information to oversee the markets and minimizing the reporting burden on the
futures industry and the public. (The Commission publishes aggregate data
concerning reported positions in its weekly “Commitments of Traders” reports, which are available at the Commission’s website and the
subject of a separate Backgrounder.
Since traders frequently
carry futures positions through more than one broker and since individuals
sometimes control or have a financial interest in more than one account, the
Commission routinely collects information that enables its surveillance staff
to aggregate related accounts. Specifically, reporting firms must file a CFTC
Form 102, to identify each new account that acquires a reportable position.[2]
In addition, once an account reaches a reportable
size, the Commission may contact the trader directly and require that the
trader file a more detailed identification report, a CFTC Form 40 (under Part
18). These two forms—the 102 and the 40—allow the Commission to identify the
name and address of the account, the person(s) controlling the trading, the
person to contact regarding trading, the nature of the account (e.g.,
whether it’s an omnibus account for another broker or it’s an individual
account), whether the reported account is related—by financial interest or
control—to another account, and the principal occupation or business of the
account owner. These forms also show whether the account is used for hedging
cash market exposure and, if so, which futures/option markets are used and what
merchandising or marketing activities are
involved. (Blank copies of the
Form 102 and Form 40 are available for viewing and downloading at the CFTC website.)
The
Commission staff use this information to determine whether the reported account
is a new trader or simply an additional account of an existing trader. This
determines whether the trading activity in the new account needs to be
aggregated with that of other accounts currently being reported or which may be
reported in the future. Only by properly identifying and aggregating accounts
can the surveillance staff make a thorough assessment of a trader’s potential
market impact and a trader’s compliance with speculative position limits.
The
Commission uses various means to ensure the accuracy of its large-trader data.
The large-trader positions reported by clearing members are compared to
clearing-member data reported by the exchanges. An inquiry is made if: a) the
sum of a clearing member’s large-trader positions exceeds the member’s open cleared
position, or b) a clearing member has a cleared position many times the
reporting level for a given market, but reports little or no large-trader
positions. This same procedure is used to compare large-trader data reported by
non-clearing FCM’s and foreign brokers to the total
positions they are carrying at other brokers or clearing members. Reporting
firms are also subject to on-site audits by exchange and Commission staff.
Through various software,
the raw large-trader data are transformed into analytical reports. A Commission
economist may view the largest traders in a specific market, a single trader
across several markets, or a trader’s pattern of trading over a specific time
period. A typical listing of large-trader data might look like this:
Table 2:
Large-Trader Data
|
|
|||||||
|
Trader Name |
Futures Position |
Delta-Adj Options |
Net Open Position |
Delivery Notices |
|||
|
Long |
Short |
Long |
Short |
Stopped |
Issued |
||
|
ABC Corp. |
1115 |
0 |
410 |
20 |
Long-1505 |
0 |
0 |
|
Doe Arbitrage |
0 |
986 |
974 |
0 |
Short-12 |
0 |
0 |
|
Joseph Smith |
0 |
874 |
0 |
0 |
Short-874 |
0 |
0 |
The
Commission also has the authority (under Part 18) to require that a trader
furnish large-trader data by filing a Form 103 report showing open futures and
option positions, purchases and sales, futures deliveries, and option exercises
on a daily basis for a specific period of time. Although this method of
obtaining large-trader data is not used frequently, it can be useful where a
trader is trading through a number of reporting firms and there is concern that
the normal data-collection process is missing some important information.
As
an additional source of information that allows surveillance economists to
investigate whether there is a threat of a market manipulation or other market
disorder, the Commission may issue a “special call” to a reporting firm or a
trader (under Parts 21 or 18). The special call is designed to gain additional
information about a firm’s traders or about a participant’s trading and
delivery activity, including information on persons who control or have a
financial interest in the account. A special call may also request information
about positions and transactions in the underlying commodity. This mechanism
may be used when a broker (domestic or foreign) is carrying large open
positions but is showing few, if any, reportable accounts. A special call may
also be used when a trader is using too many brokers to be easily monitored
through required reports, when the trader holds positions below the reporting
level, or when part of a trader's position is being carried through a foreign broker
and the required information is not received from the broker or customer in a
timely fashion or is not readily available for inspection.
Cash-Position Data. In the several markets with Federal speculative position limits (grains, the soy complex, and cotton), hedgers that hold positions in excess of those limits must file a monthly report with the Commission (under Part 19). Those reports —a Form 204 for grains and the soy complex and a Form 304 for cotton—show the trader’s positions in the cash market and are used to determine whether the trader has sufficient cash positions to justify futures and option positions above the speculative limits. In the cotton market, m