by Barbara Zigah If you were under the impression that only large or institutional-sized investors could sway the market’s direction, you’re about to have your mind blown. According to a report from the U.S.-based regulatory agency which oversees such things, nearly 95% of volume on the U.S. crude oil futures market is generated by day traders.
Tomorrow’s fodder for the day trader crowd will be the release by the Department of Energy of weekly crude oil supplies. That data is expected to show a decline of some 2.4 million barrels, as forecast by a consensus of analysts.
The Commodity Futures Trading Commission, a.k.a. the CFTC, for the first time recently acknowledged that it is the small investors who, whether strategically or not, place bets on price relationships which result in price volatility in the energy market.
Furthermore, the data shows that only 5.5% of the WTI crude oil trading volume on the NYMEX actually resulted in net changes to larger traders’ position on price direction. But it’s not just on the NYMEX that the large traders have so little influence, the data shows it’s also in the precious metals arena, as well as commodities, and financial futures markets such as Treasuries, equities, and forex.
The CFTC report comes after a year-long review of their trading reporting system, and which was initiated after a brief system crash in May 2010 which prompted demands for electronic trading reform.
This recent data was extracted after the price of oil spiked to a 3-year high. That led to some U.S. lawmakers to call for a review of investment funds which pump money into commodities, effectively manipulating the price within an asset class. To that end, the CFTC has proposed new rules which would limit such commodity investment. However, this new information may make that proposal moot, given that day trading appears to be the impetus behind daily price movements and not large, institutional traders as had previously been believed.
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