Un nouveau type de rapport (New Aggregated COT report)

Will the new aggregated COT report help small speculators?

Many traders asked to explain what is changing on the COT report and how it may help them trade. The previous COT report (and currently still the one on the weekly charts below) presents “commercials” in the same category with swap dealers. The new aggregated report separates the swap dealers into their own category (something they fought to stop from happening). I will refer to the processors, producers, merchants, and users as TC (true commercials) and SD (Swap Dealers) below. All numbers below reflect number of contracts.


Rappel sur la définition de 'Swap Dealers' : The swap dealer, which is often affiliated with a bank or other large financial institution, has emerged to serve as a bridge between the OTC swap market and the futures markets. Swap dealers act as swap counterparties both to commercial firms seeking to hedge price risks and to speculators seeking to gain price exposure. In essence, swap dealers function as aggregators or market makers, offering contracts with tailored terms to their clients before utilizing the more standardized futures markets to manage the resulting risk. The bilateral contracts that swap dealers create vary widely - from contracts tailored to customer needs, to relatively standardized contracts (some virtually identical to an exchange-traded futures contract). Because swap agreements can be highly customized and the liquidity for a particular swap contract can be low, swap dealers often rely on a variety of means, including other swaps, physical market positions, and futures contracts to offset the residual market risks in their swap book.

Last week (december 2010)  in Chicago wheat, the old COT had “commercials” net long 45,895. In the new report we see a different picture with TC (true commercials) net short  -94,592 and the SD (Swap Dealers)  net long 140,487. More interesting is the fact that the TC (true commercial) had 125,840 total short contracts, which is 43.8% of open interest (OI) and is made up of 70 traders and the SD (Swap Dealers) had 164,739 total long contracts, which is 52.7% of OI made up of only 18 traders. In this view you can see that the SD (Swap Dealers) are posturing as speculators in this market.

In gold last week, the old COT report showed Commercials -285,665 net short. However the new report shows TC net short -191,434 and the SD net short -94,231. The TC had a total short position of 230,615 (26 traders) and the SD had a total short position of 138,419 (16 traders). Combined they made up 73.9% of OI. Here we see a different view as the SD are posturing as hedgers in gold.

In crude oil, the old COT report showed “commercials” net short at -84,126. The new report has the TC net short at -257,895 and the SD net long at 173,769. The TC had a total short position of - 389,350, which is 33.6% of OI with 61 traders and the SD had a total long position of 263,686 which is 22.7% of OI with 25 traders. Here again SD are posturing as speculators.

For anyone reading this that are still shocked at where prices are for physical commodities, you should not be. When Congress blamed speculators and speculation on the price of oil in 2008, they where not talking about us small speculators. They were actually looking at the OTC derivatives market where the swap dealers are king.

The new report is a much clearer view of “smart money” activity. I am looking forward to this new report as I am sure many of you are. (FYI-The CFTC has all physical commodities completed in the new report. They are now looking into the financials. In the coming weeks I will focus on this new report to help catch high probability trend (position) trades. As I never use this report for timing my trades, it is good to know how the huge “smart money” is posturing in a market. It helps to sleep at night.

Some more informations : The new classification system doesn't resolve all the inadequacies of the COT reports by any means, but it definitely provides more information than the old scheme. By splitting commercial traders into two separate categories, the CFTC makes it easier for you to gauge the influence of investment-banking entities—the swap dealers—on the commodities markets.

Dealer activities aren't completely transparent, however. For example, we're not seeing beyond the bank level to the ultimate customer. We also still don't know if a swap dealer's counterparty is speculative, such as a hedge or index fund, or a commercial entity dealing with the cash commodity. For certain commodities, namely those with hard ceilings on speculative positions, it's a fair guess that the counterparties are noncommercial. After all, a commercial entity could hedge a large cash position under an exemption to speculative position limits, thus forgoing a transaction with a swap dealer.

Un autre excellent article (CFTC Changes COT Report) donne des explications sur le nouveau rapport :   ...Cliquez ici...