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Daytraders Account For Over 90% Of Volume, Price Formation In ES, Crude, Gold And Silver Futures

Tyler Durden's picture


The CFTC has just released two new reports looking at volume in various commodity futures and confirming what most have already known, namely that under 10% of daily futures volume in the most popular products comes from Large Trader position changes. The balance or well over 90% in most cases, originates from "daytrading" accounts, or said simply, speculators dominate price formation on the margin for the bulk of products, which also means that longer-term equilibrium levels, those determined by supply and demand, are largely washed out when all the daytrading, and thus short-term pricing, mania is factored in. This also explains why moves such as the recent desperate SPR release by the IEA are generally doomed to failure. The CFTC's Gary Gensler said that "The data shows that, in many cases, less than 20 percent of average daily trading volume results in traders changing their net long or net short all-futures- combined positions. The balance of trading is due to day trading or trading in calendar spreads." This is bad news for the hedging departments of commodity firms which deal with actual physical, and thus try to hedge price swings, as long-term price expectations are largely moot when attempting to predict short and medium-term price fluctuations. In fact, bets, even correct ones, may ultimately add to price volatility if caught in a wrong-way position that faces collateral requirements. As to whether this new data will change the administration's approach to artificially setting prices on key political commodities such as oil and precious metal, all signs point to no. This also means that churning HFT parasites, which are part of the non-Large trader universe are likely the most determining marginal price determinants for the bulk of commodities,and yes, that includes ES and interest rate products as well.

Specifically, the CFTC said that Large Trader Net positions account for the following daily futures volume:

  • Crude Oil: 5.5%
  • Gasoline: 9.9%
  • Gold: 11%
  • Silver: 7.7%
  • Copper: 10.6%
  • Platinum: 26.6%
  • Palladium: 30.3%

To determine the daytrading impact on price formation for the above, subtract the % above from 1. Again, this should not be a surprise for most. What should, however, is that when it comes to far more critical instruments, such as interest rate futures: 2, 5 and 10 Year Treasury are only 18.5%, 11.5% and 9.5% traded by non-daytraders. And the few remaining non-vacuum tube based organisms who care about stocks, will be happy to note that contracts such as the ES and ED are only traded 8.2% and 10.4% by Large Traders.

The full reports are below.

The first report, the new "Large Trader Net Position Changes," identifies the average-daily net position change at the reportable trader level for a given week. The data covers 35 physical and financial futures markets from January 2009 through May 2011.

The second report, the "Trading Account Net Position Changes" relies on transaction data provided to the Commission by the exchanges. It identifies, for a given week, the average-daily net position change at the trading account-level. The data covers 28 physical and financial futures markets from April 2010 through May 2011.


Large Trader Net Position Changes

Comparison of Large Trader and Trading Account Net Position Changes


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Tue, 07/05/2011 - 19:57 | Link to Comment GlassHammer
GlassHammer's picture

Churn and burn baby

Churn and burn...

Tue, 07/05/2011 - 20:35 | Link to Comment tom a taxpayer
tom a taxpayer's picture

Churn and burn, Brothers and Sisters, let Wolfman Jack, James Brown, and MARRS show you how to PUMP UP THE VOLUME.

Wed, 07/06/2011 - 05:02 | Link to Comment Michael
Michael's picture

But what if those 90% of population herd animals act as usual, for barn yard animals that is?

Bernays, I'm going to have a field day with this information.

So what we got left now are the true hard core believers in Keynesian economics still trading markets on a daily bases. How quaint.

You've got to give it to them, they are dedicated. What's left of them, that is.

I've sen a boat load of day traders shaken out during the Dot-Com bust. I've seen the hangers on dumped during the housing bubble bust.

I didn't think there was any of them left till now, though the few they are.

I'm going to have a lot of fun with this.

Tue, 07/05/2011 - 19:58 | Link to Comment oogs66
oogs66's picture

so when they get rid of the "speculators" there will be nothing left for the exchanges?  and people whose main skill is saying 'mine' or 'yours' will have to actually find a real way to make 7 figure incomes? 

Tue, 07/05/2011 - 19:59 | Link to Comment The Axe
The Axe's picture

No shit offense Tyler...nice story..

Tue, 07/05/2011 - 20:00 | Link to Comment camoes
camoes's picture

O RLY????

Tue, 07/05/2011 - 20:02 | Link to Comment cosmictrainwreck
cosmictrainwreck's picture

Well, this would be comical if it weren't so bloody dangerous. But I sleep fine at night, confident that the White House, PPT, NSA, IMF, World Bank, Chicom's, FDIC, SEC & CFTC are all over this.... er, uh...they are, aren't they?

Tue, 07/05/2011 - 20:02 | Link to Comment RobotTrader
RobotTrader's picture

My prediction is that with the advent of the iPad, smartphones, etc.....

Once Joe Six finds out he's been getting fleeced by the Vegas bookies by playing NFL, NBA, NHL, etc.

He'll abandon all those offshore online betting casinos and start wagering in stocks instead.  At least with stocks, it's not "all or nothing" bets.  If you are wrong, you can cut your losses and move on to another trade.  And with stocks, you can determine a trend.  With sports, forget about it.

In two years, stock and Forex speculation will be rampant, many will be daytrading 24/7.  Especially in trending markets.

Wife or Girlfriend:

"Hey, I want that $175 yoga outfit from Lululemon"

Husband or Boyfriend:

"No problem, I can trade USD/EUR for a few hours and scalp $200 for you, easy!  Then I'll transfer the profit to my Bitcoin account, and then I can flip those electronic digits to your smartphone, and voila!!  Problem solved!"

Tue, 07/05/2011 - 20:08 | Link to Comment GlassHammer
GlassHammer's picture

I think the trend you are talking about is called "the madness of crowds".



Tue, 07/05/2011 - 20:42 | Link to Comment WestVillageIdiot
WestVillageIdiot's picture

I've been making a killing trading tulip futures.  It should make up for my Beany Baby losses.

Tue, 07/05/2011 - 20:16 | Link to Comment statlawyer
statlawyer's picture

hahaha, nice

Tue, 07/05/2011 - 20:26 | Link to Comment disabledvet
disabledvet's picture

i was just reading about "bitcoin."  kinda scary when you think about it--a "virtual currency" which has soared in value!  "backed by what again"?  i imagine most people just "think of it as gaming."  in a way IT IS!  anywho..."de atorties say eets all good."  at least the (smallest segment possible of) media reported on it.  absolutely fascinated by the recent IPO concerning "virtual pets" on a farm.   I had a girlfriend years back whose daughter played this game.  My only question then was "real money?"  Still is...

Tue, 07/05/2011 - 21:36 | Link to Comment swanpoint
swanpoint's picture

Bitcoin is "backed" by computing power. CPU time spent solving a non-deterministically polynomial problem; one that grows exponentially (at least) or geometrically in time as the problem set input increases. The FED is also attempting to solve a geometrically complex problem, however the heuristic in use at the FED is much simpler: MB = MB + T, where MB is the monetary base and T is however many triillions of dollars.

Tue, 07/05/2011 - 22:53 | Link to Comment Midas
Midas's picture

You let him off easy swanpoint. Bitcoins may seem like a scam, but if you compare them to dollars you realize dollars are the scam. I do some bit-mining and have a blast every time I explain to people what it is. You always get this crazy look about how the Bitcoins come from "nothing" and yet everyone scrounges all day to get some dollars, which, as you pointed out come into existence by the billions every day. Bitcoins will be limited to 21 million, what is the final number of dollars going to be?


Wed, 07/06/2011 - 02:53 | Link to Comment terryfuckwit
terryfuckwit's picture

great to see some genuine interest here on zero hedge for bitcoins... the amazing thing for me as an out and out linux devotee is that their are absolutely no limits to the security you can build around your money with encryptian techniques and operating systems that can work purely in RAM there are no limits to what you can do.  Bitcoin does not come to you secure .. people running windows and not reading the forums will get coins stolen.. if you study the tools available ... you have security and control greater than fort knox..  and owning a couple of coins will teach you much and is a nice way to stick 2 fingers up at tbtf..and if i am promoting a ponzi sceme ... then it is the most honest transparent ponzi scheme ever with no centralised control.. bitcoins source code can be read line by line by anyone who wants... mmm nothing hidden here....

Wed, 07/06/2011 - 03:02 | Link to Comment qussl3
qussl3's picture

I like the concept of bitcoin in principle.

But i bet on the guns and govt to squash it when appropriate.

Wed, 07/06/2011 - 04:28 | Link to Comment StychoKiller
StychoKiller's picture

Right, but first they have to win the "war on drug users..."

Wed, 07/06/2011 - 04:42 | Link to Comment qussl3
qussl3's picture

The assumption is that the govt wants to win that war no?

Pretty sure competing currencies will not be treated so kindly.

Thu, 07/07/2011 - 00:35 | Link to Comment unununium
unununium's picture

I have rarely thrown money at anything as fast as I am at bitcoin.  Truly revolutionary.

Today's discovery -- a tradehill account also happens to be the cheapest and easiest way for a small investor to own the 15 or so currencies it supports.  No leverage but commissions are .3%.

I predict it will be mere months before Google throws their weight behind bitcoin.

Tue, 07/05/2011 - 20:38 | Link to Comment WestVillageIdiot
WestVillageIdiot's picture

Robot, unlike so many here, I like your posting.  I like your ability to have such a thick skin.  I wish I had that.  But pointing out LULU as a "wealth" builder really cracks me up.  That company now has a market cap of $8.5 billion.  That is just ridiculous. 

Our memories are so short.  I remember so many people calling us nuts in 2005 and 2006 for not being willing to buy a $700,000 condo in Brooklyn or Manhattan.  Actually it would have probably been more than that.  Staying away from the wealth building real estate market has really paid off for us.

I warned friends and family about real estate and was routinely ignored or worse.  For a while I still looked like a fool, missing out on great riches.  I just said, "be patient".  And that patience paid off big dividends for me.  Sadly, I can't say the same for friends that are tens of thousands of dollars underwater, stuck in depreciating assets or have watched their retirements disappear.

It is better to miss the boom than to be part of the bust. 

It is true that with some games the only way to win is not to play.  If I have to believe in LULU to win this game then it sure the fuck isn't worth playing. 

Tue, 07/05/2011 - 20:43 | Link to Comment The Axe
The Axe's picture

For 175 dollars I can get 4 blowjobs on the lower east=side...fool

Tue, 07/05/2011 - 20:47 | Link to Comment WestVillageIdiot
WestVillageIdiot's picture

Some of us don't like trannies.

Tue, 07/05/2011 - 21:57 | Link to Comment Iam_Silverman
Iam_Silverman's picture

"For 175 dollars I can get 4 blowjobs on the lower east=side...fool"

Not knowing the market - is this price reflective of an inflationary or deflationary trend?

Tue, 07/05/2011 - 22:34 | Link to Comment DeadFred
DeadFred's picture

I believe the 'blow' part implies an inflationary tendency.

Wed, 07/06/2011 - 00:15 | Link to Comment TheLooza
TheLooza's picture

but when all is said and done, there are deflationary tendencies to consider as well. at least if it's a job well done.

Tue, 07/05/2011 - 21:27 | Link to Comment Raynja
Raynja's picture

we were talking about futures


and when you play them on margins you can lose everything quickly, so im not sure what the hell your talking about

Tue, 07/05/2011 - 21:28 | Link to Comment plocequ1
plocequ1's picture

Its actually very easy. When NFLX hits $270, hit the buy button. When it hits $290, Hit the sell button. No charts needed.

Wed, 07/06/2011 - 03:40 | Link to Comment XenoFrog
XenoFrog's picture

Bitcoins are part of your prediction for the future? Really? lol

Thu, 07/07/2011 - 00:38 | Link to Comment unununium
unununium's picture

Replying so you won't be able to edit this out of existence.

Tue, 07/05/2011 - 20:08 | Link to Comment Jack Mehoff
Jack Mehoff's picture

2 Choices nowadays, you either day trade or your don't sleep. 

Tue, 07/05/2011 - 20:41 | Link to Comment WestVillageIdiot
WestVillageIdiot's picture

Really?  I sleep a lot better now that I don't daytrade. 

Cash + metals + no debt + loving wife + good food = happiness

Daytrading your own money = stress that will kill you

Tue, 07/05/2011 - 21:16 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Amen bro

Wed, 07/06/2011 - 00:48 | Link to Comment jackinrichmond
jackinrichmond's picture

tru dat

Tue, 07/05/2011 - 20:19 | Link to Comment monopoly
monopoly's picture

Broken markets anyone? What a waste.

Tue, 07/05/2011 - 20:19 | Link to Comment Steaming_Wookie_Doo
Steaming_Wookie_Doo's picture

Well, it's only fair seeing as how you're not able (or bribed not to) to take physical delivery on silver.

Tue, 07/05/2011 - 21:32 | Link to Comment Raynja
Raynja's picture

very true

you have to wonder if a large percentage of producers and end users aren't just entering private agreements off the exchanges.

Tue, 07/05/2011 - 20:32 | Link to Comment chump666
chump666's picture

Well you can bet on a reverse trade very soon on copper, short, then UST's being bought. All about China baby...

One the EFT's catch a whiff, commodities sans gold are a red line down

Tue, 07/05/2011 - 20:33 | Link to Comment MountainMan
MountainMan's picture

How dare you insult day trading. It's the only remaining legitimate form of investing!

Tue, 07/05/2011 - 20:46 | Link to Comment WestVillageIdiot
WestVillageIdiot's picture

What about PowerBall?

Tue, 07/05/2011 - 20:33 | Link to Comment chump666
chump666's picture

Trading China gray/black money crash and FUBAR sell off is all Aussie markets.  Check one ASX200 flash crash just locked in 10mins ago, tasty.

Tue, 07/05/2011 - 20:36 | Link to Comment statlawyer
statlawyer's picture

I'm daytrading two bottles of whiskey, watching them drop

Tue, 07/05/2011 - 20:45 | Link to Comment The Axe
The Axe's picture

The answer to my day-trading issues is in the bottom of one of those bottles..fucking problem is I don't know which one!

Tue, 07/05/2011 - 20:51 | Link to Comment chump666
chump666's picture

try Tequila...

Tue, 07/05/2011 - 21:17 | Link to Comment tom a taxpayer
tom a taxpayer's picture

Add water to the whiskey...extend and pretend like the banks...dilution is the solution.

Tue, 07/05/2011 - 22:00 | Link to Comment Iam_Silverman
Iam_Silverman's picture

"dilution is the solution."

Now THAT is an excellent representation of inflation!  As you water down the liquor, it takes that much more to get the same results.  Mind if I borrow that?  If you've already copyrighted it, please tell me where to send the royalties.

Tue, 07/05/2011 - 23:34 | Link to Comment tom a taxpayer
tom a taxpayer's picture

Go ahead, it's a freebie. Here's another freebie: Horrible marriage? Dissolution is the solution. Or, extend and pretend.

Tue, 07/05/2011 - 20:40 | Link to Comment mynhair
mynhair's picture

One day, my purchase of 100 shares in TZA will result in a 2,000 point drop.

Please pass the bong.

Wed, 07/06/2011 - 00:49 | Link to Comment jackinrichmond
jackinrichmond's picture

very funny..

...or the day after you sell tza, then the market will drop 2000 points

Tue, 07/05/2011 - 20:41 | Link to Comment vegas
vegas's picture

Any time you have a freely tradable market, the vast majority of participants will opt for short term price swings. So what? If you don't like it then don't get involved in it. Speculators provide liquidity. That so many lose money affects you how? It's their money not yours, and how they choose to deploy it is their business not yours or the Goberments.

Tue, 07/05/2011 - 20:44 | Link to Comment mynhair
mynhair's picture

Huh?  "freely tradable market"?  Where is that?

Tue, 07/05/2011 - 20:50 | Link to Comment mynhair
mynhair's picture

"freely tradable market"

Herr vegas,

is it really true you flunked Busted Trading 101?

Tue, 07/05/2011 - 21:23 | Link to Comment Rick64
Rick64's picture

 I think its because its so manipulated that most traders don't feel comfortable holding positions for very long. HFT has evolved and fundamentals don't determine direction.

Tue, 07/05/2011 - 21:55 | Link to Comment vegas
vegas's picture

I didn't say non-manipulated. Anyone can basically open an account and choose to trade. In that sense it is freely tradable. Lose money on an ES trade due to HFT? Well, you chose to trade it and closed it for a loss; you made the decision to open the trade.


Ultimately, the question becomes this: who do you want to "decide" who gets to trade what? Is it you, the individual, or is it Obama and his crony capitalists? Sorry, I choose the individual every time.

Tue, 07/05/2011 - 22:06 | Link to Comment Rick64
Rick64's picture

 I agree with you, but I was taking issue with freely tradable market. I would change it to freely tradable manipulated market, but I get your point.

Tue, 07/05/2011 - 22:25 | Link to Comment Bobbyrib
Bobbyrib's picture

When they play the oil and agriculture futures, it is my money. I guess I shouldn't worry though, because it will go down when we hear that the Obama Administration may investigate speculators.

Tue, 07/05/2011 - 21:07 | Link to Comment Shineola
Shineola's picture

"Let's Pretend this is Money" is a really cool game to play.



Beats the hell out of "Let's Pretend this is Food".  

Or, "Let's Pretend this is a Gun".

Or "Let's Pretend our Farm Land isn't Flooded."     

Tue, 07/05/2011 - 21:07 | Link to Comment Robslob
Robslob's picture

So to net it out:

HFT utilizes day trader volume to make it appear there is actually a stock market?

Thanks Dodd...Thanks Frank

May you rest in peace Ass Steagal and or any other legislation designed to support a trusted market.

Tue, 07/05/2011 - 21:07 | Link to Comment WhoMe
WhoMe's picture

How can this be? The Bank of Canada just told the peasants that speculators have nothing to do with the price of oil?



Wed, 07/06/2011 - 00:55 | Link to Comment jackinrichmond
jackinrichmond's picture

...well, at least they got half of the story right

i guess the world money supply doubling/tripling might have a wee effect on commodity prices also.

Tue, 07/05/2011 - 21:12 | Link to Comment Caviar Emptor
Caviar Emptor's picture


The back of my throat feels a little funny. I'm getting nauseous. 


Wed, 07/06/2011 - 00:35 | Link to Comment RockyRacoon
RockyRacoon's picture

That would be "nauseated" unless you feel like you are making others sick as well.

Tue, 07/05/2011 - 21:19 | Link to Comment Shineola
Shineola's picture

Yes, unfortunately the stock markets have become a side bet on a company's non-existent business. 

When was the last time some ass clown on "stocks-r-us tv" asked about the P/D ratio?  

Dividend Income?   COVER THE CHILDREN'S EARS!   What sort of Cretin expects to be paid interest on his investment?  See here, our stock pays a .03% dividend and you get price appreciation!   Stocks, you see, like home prices, only go up!   

Tue, 07/05/2011 - 21:40 | Link to Comment buzzsaw99
buzzsaw99's picture

Another good reason to liquidate all equity holdings.

Tue, 07/05/2011 - 21:42 | Link to Comment MacroStory
MacroStory's picture

Explains the complete inability at price discovery and the complete inability to have any forward looking perspective.

Tue, 07/05/2011 - 21:55 | Link to Comment fswalker
fswalker's picture

Lets regulate the markets. Let the government step in with a strict set of rules that will shake out 50% , 60% even 70% of the current liquidity. Let all head and shoulder formations complete and trend-lines be valid at all times. Lets regulate 50% retracement levels and fine or ban those who see the markets as a zero sum game. While we're at it why not give a 100% money back guarantee on all loosing trades just to see the average joe's e-trade account in the green again.

Tue, 07/05/2011 - 22:51 | Link to Comment WoodMizer
WoodMizer's picture

Daytraders will see the con when the TBTF are the only ones left. 

Tue, 07/05/2011 - 22:52 | Link to Comment Sutton
Sutton's picture

Crap.  Remember the TURTLES





Tue, 07/05/2011 - 23:56 | Link to Comment Kali
Kali's picture

They put the coca farmers out of work, so now they don't want them mining gold either.  Our government doesn't like competition

Wed, 07/06/2011 - 00:14 | Link to Comment TheLooza
TheLooza's picture


Wed, 07/06/2011 - 04:05 | Link to Comment ebworthen
ebworthen's picture


"Say, that's a nice bike."


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