CFTC Attempts to Overhaul Futures Markets

In an attempt to overhaul the futures market, the CFTC is refining the weekly Commitment of Traders (COT) report to more accurately reflect the transparency of the market. The current program shows the weekly changes of the long and short positions of commercials (producers/end users), large non-commercials (large speculators), and non-reportable positions (small traders). The new COT report will break down positions even further into categories ranging from swap dealers, hedge funds and institutional investors, all the way to local farmers.

The changes were proposed in early July and were expected to take hold last week. However, CFTC Chairman Gensler announced that there is a delay, noting, “We want to make sure that no one has such an outsized or large position that the concentrated position might have a burden to the market place.” Prior to 2000, speculators accounted for 20% of the open interest. At that time, regulations were loosened and since then the speculative position has risen to more than 50% of the open interest. While many are welcoming the new regulations, ETF Market Intelligence believes implementation may introduce a new set on unintended consequences.

Meanwhile, NYMEX natural gas for September delivery went off the board last Thursday losing 67.5 cents or 19.2% since going prompt (July 30th). It was the lowest monthly spot contract finish on the NYMEX (2.843) since early 2002. Even so, the contract for October delivery finished the week above $3 per MMBtu (3.033). Last Thursday’s EIA report showed an injection of 54Bcf of gas to inventories, slightly reducing the year-on-year surplus, but still leaving supplies ample. Thus, UNG made another weekly low since inception last Friday ($11.13 per share). UNG still has yet to release its recently approved additional units, but is looking at ways to do so without angering the CFTC, i.e. swaps. Fundamentals are still in play.

Comments

[manya05:]

Well, considering where the futures market came from (remember pork bellies?), you wonder what intermediary institutions even have to do with it. If you are not a farmer killing pigs, or a sausage maker, you should not even be allowed to be on the market. I admit that if someone is in the business of buying pork bellies and keeping them in storage for years, OK, you are in...but the others? And even if you are in the storage business, I would put you under the microscope as it is very easy to manipulate certain markets. Time to kick the merchants off the church.

Sep 02 06:20 AM

[john s. gordon:]

manya -well the gamblers have to gamble somewhere.
> jack

Sep 02 09:54 AM

[optionsgirl:]

Dear Manya : To suggest that anyone who has no direct business in those markets shouldn't be permitted to speculate is to destroy them.

Sep 02 11:47 AM

[dw57:]

well considering what they have to done us last year in just oil alone, which cost us as a group billions! i don't see what the purpose is for those who have no desire to take delivery of the commodity is? they are not helping those in the market manage their costs. so other than as a way to make money, they are just manipulating the cost and driving it up as they do that.


On Sep 02 11:47 AM optionsgirl wrote:

> Dear Manya : To suggest that anyone who has no direct business in
> those markets shouldn't be permitted to speculate is to destroy them.

Sep 02 12:15 PM

[i'mwithher:]

Do some research on how these markets work. Ignorance is no excuse.

Sep 02 12:22 PM

[jeffgroove:]

The parasites(politicians in this case, but bankers as well), like to deflect the light of their bad policies on the market. Now while I don't always subscribe to the efficient market hypothesis or believe it is always correct, this is a very common tactic of blame when you are massively printing money.

Sep 02 02:01 PM

[The Greates...:]

When one realizes the depth of this depression the world is in today, due to the 60% speculation of last summer of 2008 in crude oil alone, one must do something to prevent it from happening again. I know that the two biggest lies are “ Hi, were from the government and we are here to help” and one must be careful to avoid a knee jerk reaction to the situation.
For some good reading on this subject check out this site.
Global Research.
www.globalresearch.ca/...

Sep 02 10:36 PM

[The Greates...:]

Oil in our government:
Combined with its $6.8 million outlay in the first quarter, Chevron spent about $12.8 million on lobbying in the first half of 2009, the fourth-highest tab for companies and organizations that file disclosure reports, according to data from the Center for Responsive Politics.
Chevron, the second-largest U.S. oil company behind Exxon Mobil Corp., spent $3.2 million on lobbying in the second quarter of 2008.
In the most-recent period, Chevron lobbied on a variety of issues, including legislation dealing with market speculation and manipulation and Federal Trade Commission rulemaking. It also weighed in on environmental matters and industry-specific issues such as hydraulic fracturing, according to the disclosure form filed July 17 with the House clerk's office.
Besides Congress, Chevron lobbied the departments of Energy, State, Commerce, Treasury as well as the Environmental Protection Agency and the Executive Office of the President.
Among those lobbying for Chevron were Lisa Barry, the former principal deputy assistant secretary at the Commerce Department, and Judy Blanchard, former deputy staff director for the House Committee on Oversight and Government Reform.
www.opensecrets.org/
Congress needs term limits.

Sep 02 10:39 PM