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Who's to Blame for the Commodities Boom? [View article]
First, about deliveries through futures. Historically, only 2%-3% of futures trades are settled by delivery. In the vast majority of cases, futures trades are offset (bought or sold) before a delivery occurs.
Second, futures market making doesn't follow the securities model. Securities market makers are obliged to maintain two-way (bid/offer) quotes in their designated securities. Not so in futures. As a "local," I can bid, and bid ONLY, for contracts without an obligation to offer out any contracts.
Last, if commodity-based ETFs and ETNs are blamed for adding speculative pressure on the upside, some balance might be acheived by floating "short" or "bearish" commodity index products which have the potential to augment short open interest. Short products have other utilities as well as pointed out in the HAI feature "Where Are The Short Funds?" www.hardassetsinvestor....