Speculation prompts detailed report

The American authorities have published figures on commodities futures index trading which are unprecedented in their scope and detail.

The American authorities have published figures on commodities futures index trading which are unprecedented in their scope and detail.

They were published in a report by the Commodity Futures Trading Commission (CFTC) as part of an investigation into futures trading.

The report was commissioned in response to a raging debate on the extent to which speculation is driving commodity prices.

As part of the investigation the CFTC sent out 43 requests to 32 entities and sub-entities to gather information. As a result it collated data for total over-the-counter (OTC) and on-exchange positions for three quarterly snapshots: December 31, 2007, March 31, 2008 and June 30, 2008 (see table).

It found that the total net notional value of index investments on June 30 was $200 billion (£112 billion). Of this $161 billion was on American exchanges and $51 billion was accounted for by Nymex crude oil contracts.

The next most popular commodity was natural gas with $17 billion of contracts followed by corn (maize) with $13 billion.

From now on the CFTC will collect such information on a quarterly basis. However, the report warned that the nature of such information means it is difficult to make such estimates precise.

The report also argued that it is difficult to distinguish between speculation and hedging in practice.* “Staff Report on Commodity Swap Dealers & Index Traders with Commission Recommendations”. Available at www.cftc.gov