.

CFTC Backgrounder Number: 4-91

Date: January 2002

The Commitments of Traders Report

The first Commitments of Traders (COT) report was published for 13 agricultural commodities as of June 30, 1962. At the time, this report was proclaimed as "another step forward in the policy of providing the public with current and basic data on futures market operations." Those original reports were compiled on an end-of-month basis and were published on the 11^th or 12^th calendar day of the following month.

Over the years, in a continuous effort to inform better the public about futures markets, the Commodity Futures Trading Commission has improved the COT in several ways. The COT report is published more often—switching to mid-month and month-end in 1990, to every 2 weeks in 1992, and to weekly in 2000. The COT report is released more quickly—moving the publication to the 6^th business day after the "as of" date (1990) and then to the 3^rd business day after the "as of" date (1992). The report includes more information—adding data on the numbers of traders in each category, a crop-year breakout, and concentration ratios (early 1970s) and data on option positions (1995). The report also is more widely available—moving from a subscription-based mailing list to fee-based electronic access (1993) to being freely available on the Commission’s internet website (1995).

The COT reports provide a breakdown of each Tuesday's open interest for markets in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC. The weekly reports for Futures-Only Commitments of Traders and for Futures-and-Options-Combined Commitments of Traders are released every Friday at 3:30 p.m. Eastern time.

Reports are available in both a short and long format. The short report shows open interest separately by reportable and nonreportable positions. For reportable positions, additional data are provided for commercial and non-commercial holdings, spreading, changes from the previous report, percents of open interest by category, and numbers of traders. The long report, in addition to the information in the short report, also groups the data by crop year, where appropriate, and shows the concentration of positions held by the largest four and eight traders.

Current and historical Commitments of Traders data are available on the Internet at the Commission’s website: http://www.cftc.gov. Also available at that site are historical COT data going back to 1986 for futures-only reports and to 1995 for option-and-futures-combined reports.

Example

A page from the June 13, 2000, COT report (short format) showing data for the Chicago Board of Trade's wheat futures contract is reproduced below. Explanatory notes follow the table.

WHEAT - CHICAGO BOARD OF TRADE
          REPORTABLE POSITIONS AS OF 06/13/00                |
-------------------------------------------------------------|  NONREPORTABLE
      NON-COMMERCIAL      |   COMMERCIAL   |       TOTAL     |    POSITIONS
--------------------------|----------------|-----------------|----------------
 LONG  |  SHORT |SPREADING| LONG  |  SHORT |  LONG  |  SHORT |  LONG  | SHORT
------------------------------------------------------------------------------
(CONTRACTS OF 5,000 BUSHELS)                          OPEN INTEREST:   132,258
COMMITMENTS
 23,191   29,740   17,964   51,732   61,646   92,887  109,350   39,371  22,908

CHANGES FROM 06/06/00 (CHANGE IN OPEN INTEREST:   1,652)
 -1,627     -664   -1,407    3,071    5,534       37    3,463    1,615  -1,811

PERCENT OF OPEN INTEREST FOR EACH CATEGORY OF TRADERS
   17.5     22.5     13.6     39.1     46.6     70.2     82.7     29.8    17.3

NUMBER OF TRADERS IN EACH CATEGORY (TOTAL TRADERS:     277)
     94       79       68       59       55      200      175

Explanatory Notes

Open Interest - Open interest is the total of all futures and/or option contracts entered into and not yet offset by a transaction, by delivery, by exercise, etc. The aggregate of all long open interest is equal to the aggregate of all short open interest. Open interest held or controlled by a trader is referred to as that trader's position. For the COT Option & Futures Combined report, option open interest and traders' option positions are computed on a futures-equivalent basis using delta factors supplied by the exchanges. Long-call and short-put open interest are converted to long futures-equivalent open interest. Likewise, short-call and long-put open interest are converted to short futures-equivalent open interest. For example, a trader holding a long put position of 500 contracts with a delta factor of 0.50 is considered to be holding a short futures-equivalent position of 250 contracts. A trader's long and short futures-equivalent positions are added to the trader's long and short futures positions to give "combined-long" and "combined-short" positions.

Open interest, as reported to the Commission and as used in the COT report, does not include open futures contracts against which notices of deliveries have been stopped by a trader or issued by the clearing organization of an exchange.

Reportable Positions - Clearing members, futures commission merchants, and foreign brokers (collectively called "reporting firms") file daily reports with the Commission. Those reports show the futures and option positions of traders that hold positions above specific reporting levels set by CFTC regulations. (Current Commission reporting levels can also be found at the Commission’s website noted above.) If, at the daily market close, a reporting firm has a trader with a position at or above the Commission’s reporting level in any single futures month or option expiration, it reports that trader’s entire position in all futures and options expiration months in that commodity, regardless of size. The aggregate of all traders’ positions reported to the Commission usually represents 70 to 90 percent of the total open interest in any given market. From time to time, the Commission will raise or lower the reporting levels in specific markets to strike a balance between collecting sufficient information to oversee the markets and minimizing the reporting burden on the futures industry.

Commercial and Non-commercial Traders – When an individual reportable trader is identified to the Commission, the trader is classified either as "commercial" or "non-commercial." All of a trader's reported futures positions in a commodity are classified as commercial if the trader uses futures contracts in that particular commodity for hedging as defined in the Commission's regulations (1.3(z)). A trading entity generally gets classified as a "commercial" by filing a statement with the Commission (on CFTC Form 40) that it is commercially "…engaged in business activities hedged by the use of the futures or option markets." In order to ensure that traders are classified with accuracy and consistency, the Commission staff may exercise judgment in re-classifying a trader if it has additional information about the trader’s use of the markets.

A trader may be classified as a commercial in some commodities and as a non-commercial in other commodities. A single trading entity cannot be classified as both a commercial and non-commercial in the same commodity. Nonetheless, a multi-functional organization that has more than one trading entity may have each trading entity classified separately in a commodity. For example, a financial organization trading in financial futures may have a banking entity whose positions are classified as commercial and have a separate money-management entity whose positions are classified as non-commercial.

Nonreportable Positions - The long and short open interest shown as "Nonreportable Positions" are derived by subtracting total long and short "Reportable Positions" from the total open interest. Accordingly, for "Nonreportable Positions," the number of traders involved and the commercial/non-commercial classification of each trader are unknown.

Spreading - For the futures-only report, spreading measures the extent to which each non-commercial trader holds equal long and short futures positions. For the options-and-futures-combined report, spreading measures the extent to which each non-commercial trader holds equal combined-long and combined-short positions. For example, if a non-commercial trader in Eurodollar futures holds 2,000 long contracts and 1,500 short contracts, 500 contracts will appear in the "Long" category and 1,500 contracts will appear in the "Spreading" category. These figures do not include intermarket spreading, e.g., spreading Eurodollar futures against Treasury Note futures. [See a further explanation of "spreading" under the "Old and Other Futures" caption below.]

Changes in Commitments from Previous Reports - Changes represent the differences between the data for the current report date and the data published in the previous report.

Percent of Open Interest – Percents are calculated against the total open interest for the futures-only report and against the total futures-equivalent open interest for the options-and-futures-combined report. Percents less than 0.05 are shown as 0.0, and the percents may not add to exactly 100.0 due to rounding.

Number of Traders - To determine the total number of reportable traders in a market, a trader is counted only once regardless whether the trader appears in more than one category (non-commercial long or short only, non-commercial spreading, and commercial long or short). To determine the number of traders in each category, however, a trader is counted in each category in which the trader holds a position. Therefore, the sum of the numbers of traders in each category will often exceed the "Total" number of traders in that market.

Old and Other Futures (long form only) - For selected commodities where there is a well-defined marketing season or crop year, the COT data are broken down by "old" and "other" crop years. Table 1 (below) lists those commodities and the first and last futures of the marketing season or crop year. In order not to disclose positions in a single future near its expiration, on the first day of the month of the last future in an "old" crop year, the data for that last future are combined with the data for the next crop year and are shown as "old" crop futures. For example, in corn, where the first month of the crop year is December and the last month of the prior crop year is September, on September 1, 2000, positions in the September 2000 futures month were aggregated with positions in the December 2000 through September 2001 futures months and shown as "old" crop futures—positions in all subsequent corn futures months were shown as "other."

For the "old" and "other" figures, spreading is calculated for equal long and short positions within a crop year. If a non-commercial trader holds a long position in an "old" crop-year future and an equal short position in an "other" crop-year future, the long position will be classified as "long-only" in the "old" crop year and the short position will be classified as "short-only" in the "other" crop year. In this example, in the "all" category, which considers each trader's positions without regard to crop year, that trader's positions will be classified as "spreading." For this reason, summing the "old" and "other" figures for long-only, for short-only, or for spreading will not necessarily equal the corresponding figure shown for "all" futures. Any differences result from traders that spread from an "old" crop-year future to an "other" crop-year future.

Concentration Ratios (long form only) - The report shows the percents of open interest held by the largest four and eight reportable traders, without regard to whether they are classified as commercial or non-commercial. The concentration ratios are shown with trader positions computed on a gross long and gross short basis and on a net long or net short basis. The "Net Position" ratios are computed after offsetting each trader’s equal long and short positions. Thus a reportable trader with relatively large, balanced long and short positions in a single market may be among the four and eight largest traders in both the gross long and gross short categories, but will probably not be included among the four and eight largest traders on a net basis.

[See Below: Table 1, Major Markets for Which the COT Data Are Shown by Crop Year.]

Table 1

Major Markets for Which the COT Data Are Shown by Crop Year:

SPECULATIVE LIMITS, HEDGING, AND AGGREGATION IN
COMMODITY FUTURES AND OPTIONS

To protect futures markets from excessive speculation that can cause unreasonable or unwarranted price fluctuations, the Commodity Exchange Act (CEA) authorizes the CFTC (Commission) to impose limits on the size of speculative positions in futures markets. Furthermore, exchanges are required by CFTC rule 150.5 to adopt speculative limit rules for certain other contracts not subject to CFTC speculative limits.

There are three basic elements to the regulatory framework for speculative position limits. They are:

This Backgrounder covers the current rules and policies for speculative position limits, hedging, and aggregation as they apply to commodity futures and options. Attached is a guide to the speculative limit levels that apply to major markets.

Speculative Position Limits

The CEA, §4a(a), specifically holds that excessive speculation in a commodity traded for future delivery may cause "sudden or unreasonable fluctuations or unwarranted changes in the price of such commodity." That section provides that, for the purpose of diminishing, eliminating, or preventing such problems, the Commission may fix limits on the amount of speculative trading that may be done or speculative positions that may be held in contracts for future delivery.

All agricultural and natural resource and many financial futures and option contracts are subject to speculative position limits. For several markets (corn, oats, wheat, soybeans, soybean oil, soybean meal, and cotton), the limits are determined by the Commission and set out in Federal regulations. For all other markets, the limits are determined by the exchanges according to standards established by the Commission. Violations of exchange-set limits are subject to exchange disciplinary action, and the Commission may institute enforcement action against violations of exchange speculative limit rules that have been approved by the Commission.

The Commission does not require that exchanges set position-limit levels for markets that have Federal speculative limits or for markets in major foreign currencies. For all other markets, acceptable speculative-limit levels typically combine futures and options on a delta-adjusted basis, as well as set absolute levels for gross option positions. For new markets, exchanges are required to set the initial position-limit levels for non-spot months at a minimum of 1,000 contracts for tangible commodities and 5,000 contracts for financial and energy markets. For existing markets, reasonable single-month and all-months-combined limits are generally no larger than 10 percent of the open interest up to a level of 25,000 contracts, with a marginal increase of 2.5 percent after that.

Speculative limits in physical-delivery markets are generally set at a lower level during the spot month (the month when the futures contract matures and becomes deliverable). Lower limits in the spot month are important because that is when physical delivery may be required and when the contract may be more vulnerable to price fluctuation caused by abnormally large positions or disorderly trading practices.

The Commission requires that spot-month levels for physical-delivery markets be based upon an analysis of deliverable supplies and the history of spot-month liquidations. Specifically the spot-month limits for physical-delivery markets must be no more than 25 percent of the deliverable supply. For cash-settled markets, spot-month position limits should be no greater than necessary to minimize the potential for manipulation or distortion of the contract’s or the underlying commodity’s price.

After 12 months of trading, exchanges are permitted to replace position limits with "accountability" rules for qualifying contracts on financial instruments, intangible commodities, or certain tangible commodities. In order to qualify for accountability rules, these markets must meet requirements with respect to average month-end open interest and average daily volume and have a highly liquid cash market. If a market has accountability rules, a trader—whether speculating or hedging—is not subject to a specific limit. Once a trader reaches a preset accountability level, however, he must provide information about his positions upon request by the exchange. Depending upon the size of the market and type of commodity, any trader over the accountability level must also consent to stop increasing his position if so ordered by the exchange. (The specific requirements that exchanges must meet in order to adopt accountability rules are set out in Commission Rule 150.5(e).)

Exemptions

The Commission and exchanges grant exemptions to their position limits for bona fide hedging (as defined in Commission Rule 1.3(z)). A hedge is a futures or option transaction or position that normally represents a substitute for transactions to be made or positions to be taken at a later time in a physical marketing channel. Hedges must be economically appropriate to the reduction of risk for a commercial enterprise and must arise from a change in the value of hedger's (current or anticipated) assets or liabilities.

A short hedge, for example, includes sales for future delivery (short futures positions) that do not exceed the amount of the commodity that the seller owns, has agreed to purchase (for a fixed price), or anticipates producing during the next 12 months. A long hedge includes long futures positions that do not exceed the hedger's fixed-price sales or 12 months' unfilled anticipated requirements for processing or manufacturing.

There are a number of technical provisions relating to eligibility for hedge exemptions, including the treatment of cross hedging and applications to the Commission for case-by-case exemptions in special circumstances. There is also the important requirement, that: "… no transactions or position will be classified as bona fide hedging... unless their purpose is to offset price risks incidental to commercial cash or spot operations and such positions are established and liquidated in an orderly manner in accordance with sound commercial practices. …" [Commission Rule 1.3(z), emphasis added].

Exchanges may also grant exemptions for spreads, straddles, or arbitrage, or other exemptions that are consistent with the purposes of position-limit rules. The Commission requires that exchanges establish a program for traders to apply for these exemptions and be granted a specific exemption level higher than the applicable speculative limit rather than simply be granted a limitless hedge exemption. Exchanges sometimes disallow or place severe restrictions on exemptions during the last several days of trading in a delivery month. The Commission periodically reviews how each exchange grants exemptions, how it monitors compliance with its limits, and what types of regulatory action (warnings, fines, trading suspensions, etc.) the exchange takes once a violation of a position limit or exemption is detected.

In the several markets with Federal limits, hedgers must file a report with the Commission if their futures/option positions exceed the speculative position limits (see Commission Rules Part 19). That report must be filed monthly or in response to a request by the Commission. It shows the trader’s positions in the cash market and is used to check whether the trader has sufficient cash position to justify futures/option positions in excess of the speculative position limits.

Aggregation Requirements

In order to achieve the intended effect of the speculative position limits, the Commission and the exchanges treat multiple positions that are subject to common ownership or control as if they were a single trader. Accounts are considered to be under common ownership if there is a 10 percent or greater financial interest. The rules are applied in a manner calculated to aggregate related accounts. For example, each participant with a 10 percent or greater interest in a partnership account must aggregate the entire position of the partnership—not just their fractional share—together with whatever positions they may hold separately from the partnership. Likewise, a pool comprised of many traders is allowed only to hold positions as if it were a single trader. The Commission also treats accounts that are not otherwise related, but are acting pursuant to an express or implied agreement, as a single aggregated position for purposes of applying the limits.

There are narrow exceptions to the aggregation rules for limited partners and pool participants that have no knowledge of, or control over, the positions of the pool. Also exempted are commodity pool operators or commodity trading advisors with commonly-owned but independently-controlled market positions. Entities claiming this exemption are required, upon call by the Commission, to provide information supporting their claim that the account controllers for these positions are acting completely independently of each other (see table below).

GUIDE TO SPECULATIVE POSITION LIMITS (See Note 1)

For Major Futures/Option Markets (in contracts)

NOTE 1: This table is only a general guide to speculative position limits and includes futures/option markets that had a combined open interest of approximately 10,000 contracts or greater recently. The limits are subject to change. They are generally based upon "futures equivalent" positions, i.e., futures plus delta-adjusted options. There may be separate limits on gross option positions. The "spot month" is defined in many different ways, but generally refers to the nearest futures month beginning on a date near the first business day of the month in which the futures expires or on a date near the first day that delivery notices can be tendered. Some spot-month limits apply to both hedge and speculative positions. For the current rules and interpretations, see Commission Rules Part 150 and consult the appropriate exchange.

# # #

THE CFTC’s LARGE-TRADER REPORTING SYSTEM

As a part of its market surveillance program, the Commodity Futures Trading Commission (Commission) operates a comprehensive system of collecting information on market participants. Under rules set out in Parts 15, 16, 17, 18, 19, and 21 of the Regulations under the Commodity Exchange Act (CEAct),^[1] the Commission collects market data and position information from exchanges, clearing members, futures commission merchants (FCMs), foreign brokers, and traders. The Commission has assigned confidential reporting numbers to reporting firms and traders to ensure the privacy of the information they provide. Except under limited circumstances, the Commission is prohibited (under §8 of the CEAct) from publicly disclosing any person’s positions, transactions, or trade secrets.

Clearing-Member Data. In addition to providing public data on trading volume, open contracts, futures delivery notices, exchanges of futures for cash, and prices, exchanges must provide the Commission (under Part 16) with confidential information on the aggregate positions and trading activity of each of their clearing members. Each day as of the previous day’s close, exchanges report each clearing member’s open long and short positions, purchases and sales, exchanges of futures for cash, and futures delivery notices. These data are reported separately by proprietary and customer accounts by futures month and, for options, by puts and calls by expiration date and strike price. A portion of the clearing-member data for a specific market might look like this:

Table 1: Clearing-Member Data

The Commission staff use these data to identify large cleared positions, in single markets or across many markets and exchanges, to audit large-trader reports, and to identify account aggregation issues.

Clearing-member data, however, do not identify the beneficial owners of positions. The aggregate customer position reported for a clearing member may represent a single trader or numerous traders. Moreover, the data also would not reveal a circumstance where a single trader controls substantial portions of the customer positions at more than one clearing member and, therefore, controls a substantial portion of the market. To address these limitations on clearing-member data, the Commission has at the heart of its market surveillance program a large-trader reporting system.

Large-Trader Data. Market surveillance must assess an individual trader’s activities and potential power in a market and enforce the limits on speculative positions. To do this in markets characterized by substantial numbers of customers trading through intermediaries, the Commission and the exchanges employ a comprehensive large-trader reporting system (LTRS). Under the Commission’s LTRS, clearing members, FCMs, and foreign brokers (collectively called “reporting firms”) file daily reports with the Commission (under Part 17). Those reports show the futures and option positions of traders that hold positions at or above specific reporting levels set by the Commission. (A list of current reporting levels can be found in Part 15 of the Commission’s regulations and at the Commission’s website.) If, at the daily market close, a reporting firm has a trader with a position at or above the Commission’s reporting level in any single futures month or option expiration, the firm reports that trader’s entire position in all futures and options expiration months in that commodity, regardless of size.

The aggregate of all large-traders’ positions reported to the Commission usually represents 70 to 90 percent of the total open interest in any given market. The reporting level for large-trader reports ranges from 25 contracts to 1000 contracts. The level for any given market is based on the total open positions in that market, the size of positions held by traders in the market, the surveillance history of the market, and, for the physical-delivery markets, the size of deliverable supplies. From time to time, the Commission will raise or lower the reporting levels in specific markets to strike a balance between collecting sufficient information to oversee the markets and minimizing the reporting burden on the futures industry and the public. (The Commission publishes aggregate data concerning reported positions in its weekly “Commitments of Traders” reports, which are available at the Commission’s website and the subject of a separate Backgrounder.

Since traders frequently carry futures positions through more than one broker and since individuals sometimes control or have a financial interest in more than one account, the Commission routinely collects information that enables its surveillance staff to aggregate related accounts. Specifically, reporting firms must file a CFTC Form 102, to identify each new account that acquires a reportable position.^[2] In addition, once an account reaches a reportable size, the Commission may contact the trader directly and require that the trader file a more detailed identification report, a CFTC Form 40 (under Part 18). These two forms—the 102 and the 40—allow the Commission to identify the name and address of the account, the person(s) controlling the trading, the person to contact regarding trading, the nature of the account (e.g., whether it’s an omnibus account for another broker or it’s an individual account), whether the reported account is related—by financial interest or control—to another account, and the principal occupation or business of the account owner. These forms also show whether the account is used for hedging cash market exposure and, if so, which futures/option markets are used and what merchandising or marketing activities are involved. (Blank copies of the Form 102 and Form 40 are available for viewing and downloading at the CFTC website.)

The Commission staff use this information to determine whether the reported account is a new trader or simply an additional account of an existing trader. This determines whether the trading activity in the new account needs to be aggregated with that of other accounts currently being reported or which may be reported in the future. Only by properly identifying and aggregating accounts can the surveillance staff make a thorough assessment of a trader’s potential market impact and a trader’s compliance with speculative position limits.

The Commission uses various means to ensure the accuracy of its large-trader data. The large-trader positions reported by clearing members are compared to clearing-member data reported by the exchanges. An inquiry is made if: a) the sum of a clearing member’s large-trader positions exceeds the member’s open cleared position, or b) a clearing member has a cleared position many times the reporting level for a given market, but reports little or no large-trader positions. This same procedure is used to compare large-trader data reported by non-clearing FCM’s and foreign brokers to the total positions they are carrying at other brokers or clearing members. Reporting firms are also subject to on-site audits by exchange and Commission staff.

Through various software, the raw large-trader data are transformed into analytical reports. A Commission economist may view the largest traders in a specific market, a single trader across several markets, or a trader’s pattern of trading over a specific time period. A typical listing of large-trader data might look like this:

Table 2: Large-Trader Data

The Commission also has the authority (under Part 18) to require that a trader furnish large-trader data by filing a Form 103 report showing open futures and option positions, purchases and sales, futures deliveries, and option exercises on a daily basis for a specific period of time. Although this method of obtaining large-trader data is not used frequently, it can be useful where a trader is trading through a number of reporting firms and there is concern that the normal data-collection process is missing some important information.

As an additional source of information that allows surveillance economists to investigate whether there is a threat of a market manipulation or other market disorder, the Commission may issue a “special call” to a reporting firm or a trader (under Parts 21 or 18). The special call is designed to gain additional information about a firm’s traders or about a participant’s trading and delivery activity, including information on persons who control or have a financial interest in the account. A special call may also request information about positions and transactions in the underlying commodity. This mechanism may be used when a broker (domestic or foreign) is carrying large open positions but is showing few, if any, reportable accounts. A special call may also be used when a trader is using too many brokers to be easily monitored through required reports, when the trader holds positions below the reporting level, or when part of a trader's position is being carried through a foreign broker and the required information is not received from the broker or customer in a timely fashion or is not readily available for inspection.

Cash-Position Data. In the several markets with Federal speculative position limits (grains, the soy complex, and cotton), hedgers that hold positions in excess of those limits must file a monthly report with the Commission (under Part 19). Those reports —a Form 204 for grains and the soy complex and a Form 304 for cotton—show the trader’s positions in the cash market and are used to determine whether the trader has sufficient cash positions to justify futures and option positions above the speculative limits. In the cotton market, merchants and dealers file a weekly Form 304 report of their unfixed-price cash positions. That report is used to publish a weekly “Cotton On Call” report, which is published as a service to the cotton industry and shows how many unfixed-price cash cotton purchases and sales are outstanding against each cotton futures month.

Traders that hold reportable positions in designated futures and option markets must keep records showing all details concerning their positions and transactions in the futures and options and in the underlying commodity (under Part 18). This includes inventories, purchases, and sales of the cash commodity represented by the futures market, as well as its products and byproducts. Upon request by the Commission, a trader must furnish the Commission with any pertinent information about those positions or transactions.

In summary, the Commission operates an extensive reporting system that includes timely data on clearing members and large traders. These data are the core of a comprehensive market surveillance program that monitors the Nation’s futures markets on a daily basis in order to preserve these markets’ economic functions of hedging and price discovery.

# # #

CFTC Large-Trader Reporting Levels¹

Commission Reg. 15.03(b)

COMMODITY FUTURES TRADING COMMISSION

17 CFR Parts 15, 16 and 17

RIN 3038-ZA10


Changes in Reporting Levels for Large Trader Reports

AGENCY: Commodity Futures Trading Commission.

ACTION: Final Rulemaking.

-----------------------------------------------------------------------

SUMMARY: The Commodity Futures Trading Commission (Commission or CFTC) 
periodically reviews its large trader reporting rules to ensure that 
the Commission is receiving adequate information to carry out its 
market surveillance programs. Based upon the Commission's most recent 
review of these rules the Commission is amending, as proposed, Parts 
15, 16, and 17 of its rules, 17 CFR Parts 15, 16 and 17. The final 
amendments to Part 15 raise the reporting levels at which futures 
commission merchants (FCMs), clearing members, foreign brokers,\1\ and 
traders must file large trader reports in certain commodities to reduce 
the number of required reports. The Commission is also deleting, as 
proposed, the requirement that where an independent account controller 
trades for a number of commodity pools, the carrying firm must identify 
separately each such commodity pool. In addition, the amendments 
delete, as proposed, reporting Rule 17.01(c) under which a reporting 
firm was required to identify the number and name of other accounts 
that the trader controlled or owned that were not included in the 
special account.
---------------------------------------------------------------------------

\1\ FCMs, clearing members and foreign brokers are referred to 
herein collectively as ``firms.''
---------------------------------------------------------------------------

The Commission is also reorganizing, as proposed, the identifying 
information large traders report on CFTC Form 40 ``Statement of 
Reporting Trader'' to obtain and present data more useful to the 
Commission's market surveillance activities. In addition, the 
Commission is deleting the requirement under Part 16, as proposed, that 
exchanges provide weekly option large trader data directly to the 
Commission. These final amendments streamline the reporting process and 
substantially lessen the burden on persons reporting, as well as the 
processing workload of the Commission, without compromising the 
integrity of the Commission's large trader reporting system, its market 
surveillance activities or its oversight responsibilities.

EFFECTIVE DATE: May 16, 2000.

FOR FURTHER INFORMATION CONTACT: Lamont L. Reese, or Kimberly A. 
Browning, Assistant Chief Counsel, Division of Economic Analysis, Three 
Lafayette Centre, 1155 21st Street, NW, Washington, D.C. 20581, 
telephone (202) 418-5600, or electronically [lreese@cftc.gov] or 
[kbrowning@cftc.gov].

SUPPLEMENTARY INFORMATION:

I. Background

The Commission has re-examined its rules regarding its large trader 
reporting system. The Commission's large-trader reporting system is an 
important Commission oversight tool. These rules require FCMs to report 
to the Commission position information of the largest futures and 
options traders and require the traders themselves to provide certain 
identifying information. Reporting levels are set in the designated 
futures and option markets under the authority of sections 4i and 4c of 
the Act to ensure that the Commission receives adequate information to 
carry out its market surveillance programs. These market surveillance 
programs are designed to detect and to deter market congestion and 
price manipulation and to enforce speculative position limits. They 
also provide information regarding the overall hedging and speculative 
use of, and foreign participation in, the futures markets and other 
matters of public interest. Generally, the firm carrying the reportable 
trader's position files large trader reports.\2\
---------------------------------------------------------------------------

\2\ Specifically, Parts 17 and 18 of the regulations require 
reports from firms and traders, respectively, when a trader holds a 
``reportable position.'' A reportable position is any open contract 
position that at the close of the market on any business day equals 
or exceeds the quantity specified in Commission Rule 15.03 in 
either: (1) Any one future of any commodity on any one contract 
market, excluding futures contracts against which notices of 
delivery have been stopped by a trader or issued by the clearing 
organization of a contract market; or (2) Long or short put or call 
options that exercise into the same future of any commodity on any 
one contract market. 17 CFR 15.00 and Part 150. The firms which 
carry accounts for traders holding ``reportable positions'' are 
required to identify those accounts by filing a CFTC Form 102, 
discussed infra, and to report all reportable positions in the 
accounts to the Commission. The individual trader who holds or 
controls the reportable position, however, is required to report to 
the Commission only in response to a special call.

---------------------------------------------------------------------------

[[Page 14453]]

II. Proposed Rulemakings

A. Parts 15 and 17 (64 FR 5200)

Based upon the Commission's re-examination of its large trader 
reporting system rules, the Commission published a notice of proposed 
rulemaking (proposed rulemaking) to amend Parts 15 and 17 of its rules. 
64 FR 5200 (February 3, 1999). Specifically, the Commission proposed to 
raise the reporting levels in certain domestic contracts. The 
Commission also proposed to modify reporting levels for foreign 
currencies. In addition, the Commission proposed to list the reporting 
levels for the grains and soybeans in terms of contracts rather than 
bushels.
The Commission also proposed to streamline the reporting process by 
deleting those sections of Sec. 17.01 requiring that ``special 
account'' \3\ data reflected on CFTC Form 102s must include specific 
information on commodity pools and pool operators, as well as ``other 
account'' data, described infra, that Sec. 17.01(c) required. In 
addition, the Commission proposed to reorganize its Form 40,\4\ to 
present data in a more useful manner.
---------------------------------------------------------------------------

\3\ Part 17 of the Commission's regulations requires that firms 
report to the Commission when an account first becomes reportable. 
When a trade first exceeds a reporting level, the firm labels the 
account a special account. The firm assigns a reporting number to 
the special account and reports all information to the Commission 
using this number. The firm must also file with the Commission Form 
102. Commission Rule 17.01, 17 CFR 17.01. CFTC Form 102 identifies 
persons who have a financial interest in or trading control of a 
special account, informs the Commission of the type of account that 
is being reported and gives preliminary information whether 
positions and transactions are commercial or noncommercial in 
nature. The CFTC Form 102 must also be updated when information 
concerning financial interest in, or control of, the special account 
changes. 17 CFR 17.02.
\4\ Under Part 18 of the Commission's regulations, traders who 
own or control reportable positions are required to file a CFTC Form 
40 on call by the Commission or its delegee disclosing information 
about the ownership or control of their futures and option 
positions.
---------------------------------------------------------------------------

Two commenters, the Chicago Board of Trade (CBT) and the Chicago 
Mercantile Exchange (CME), responded to the notice of proposed 
rulemaking. Both CBT and CME objected to the majority of the proposed 
amendments. In summary, these two exchanges similarly opined that 
through implementation of the proposed amendments, the market 
surveillance activities of self-regulatory organizations would be 
compromised by ``eliminating the collection of important market data 
that [the exchanges rely] upon * * * as part of [their] rigorous 
financial and market surveillance programs.'' \5\ In addition, both CBT 
and CME expressed the same view that the exchanges, and not the 
Commission, should set reporting levels. These comments are discussed 
in greater detail below.
---------------------------------------------------------------------------

\5\ See the CBT's letter of April 5, 1999 to the Commission (CBT 
letter).
---------------------------------------------------------------------------

B. Part 16 (61 FR 37409)

Separately, in May 1997, the Commission amended its reporting rules 
to require that firms file option large trader reports with the 
Commission on a daily basis. 62 FR 24026 (May 2, 1997). Although as 
part of that rulemaking, the Commission proposed deleting the 
requirement under Part 16 that contract markets provide weekly option 
large trader data directly to the Commission,\6\ in issuing final 
rules, the Commission deferred taking that action until after all firms 
began to provide the required daily reports. The Commission explained 
that it was in the process of reengineering its market surveillance 
software to accommodate the receipt and processing of daily option 
large trade data, directly from the firms, and that collection of such 
information could begin only after the Commission had completed its 
software development and had tested the software jointly with the 
firms. The Commission further stated that since the process could be 
completed prior to the Commission's deletion of the requirement that 
exchanges report larger trader option information under Part 16, it 
``will take no enforcement action against an exchange for not providing 
weekly option large trader data upon a finding that firms are providing 
such data for contract markets on the exchange.'' \7\
---------------------------------------------------------------------------

\6\ See, 61 FR 37409 (July 18, 1996) (Part 16 proposed 
rulemaking).
\7\ 62 FR 24032. The Commission delegated to the Director of the 
Division of Economic Analysis (Division), the authority to make the 
required findings and determination granting this no-action relief 
to the exchanges. Id. For a complete discussion of the comments 
received in response to the Commission's Part 16 proposed 
rulemaking, see Id.
---------------------------------------------------------------------------

III. Final Rules

A. Reporting Levels

In the proposed rulemaking, the Commission explained that it 
``periodically reviews information concerning trading volume, open 
interest, and the number and position sizes of individual traders 
relative to the reporting levels for each market to determine if 
coverage of open interest is adequate for effective market 
surveillance.'' 64 FR 5201. The Commission noted that in performing 
such periodic reviews, it is also ``mindful of the paperwork burden 
associated with these reporting requirements and reviews them with an 
eye to streamlining that burden to the extent compatible with its 
responsibilities for rigorous surveillance of the futures and option 
markets.'' Id. In this regard, the Commission explained that ``its most 
recent review of reporting levels indicated that the size of trading 
volume, open interest, and position of individual traders would enable 
the Commission to raise [certain] reporting levels''. Id.\8\
---------------------------------------------------------------------------

\8\ Specifically, the Commission proposed to raise reporting 
levels as follows: (1) Lean Hogs from 50 to 100 contracts, (2) Rough 
Rice from 25 to 50 contracts, (3) Goldman Sachs Commodity Index from 
25 to 100 contracts, (4) Soybean Oil from 175 to 200 contracts, (5) 
Soybean Meal from 175 to 200 contracts, (6) 1-Month LIBOR from 100 
to 300 contracts, (7) 30-Day Fed Funds from 100 to 300 contracts, 
(8) 3-Month Eurodollars from 850 to 1000 contracts, (9) 3-Month 
Euroyen from 25 to 100 contracts, (10) 2-Year US Treasury Notes from 
200 to 500 contracts, (11) 5-Year US Treasury Notes from 300 to 800 
contracts, (12) 10-Year US Treasury Notes from 500 to 1000 
contracts, (13) 30-Year US Treasury Bonds from 500 to 1000 
contracts, (14) Municipal Bond Index from 100 to 300 contracts, (15) 
Dow Jones Industrial Average Index from 25 to 100 contracts, (16) 
NASDAQ 100 Stock Index from 25 to 100 contracts, (17) NIKKEI Stock 
Average from 50 to 100 contracts, (18) Russell 2000 Stock Index from 
25 to 100 contracts, (19) S&P 400 Midcap Stock Index from 25 to 100 
contracts, (20) S&P 500 Stock Index from 600 to 1000 contracts, (21) 
Crude Oil from 300 to 350 contracts, (22) Natural Gas from 100 to 
175 contracts, and (23) Sugar 11 from 300 to 400 contracts.
The Commission also proposed to delete Rule 15.03's separate 
reference to ``GNMA,'' a contract that is now currently dormant. 
See, 17 CFR 5.2(a). The Commission explained that under this 
proposal, if trading in GNMAs were to be reactivated, the reporting 
level would be 25 contracts.
---------------------------------------------------------------------------

The Commission also proposed modification of the reporting levels 
for foreign currencies. In particular, the Commission noted that 
``Commission Rule 15.03 does not distinguish among foreign currencies, 
setting a uniform standard for all. However, surveillance of contracts 
on currencies of the major economies requires fewer large trader 
reports than for contracts on the currencies of the emerging markets.'' 
Id. Accordingly, the Commission proposed to amend Rule 15.03 to 
classify the European currency unit (and its successor, the Euro) and 
the currencies of Japan, Germany, the UK, France, Italy, Canada, 
Australia, Switzerland, Sweden, Belgium, and the Netherlands as ``Major 
Foreign Currencies'' and to raise the reporting level applicable to 
them to 400 from the then current level of 200 contracts.
In addition, the Commission proposed to lower the reporting level 
for all other foreign currencies to 100 contracts in order to obtain 
needed information in surveilling these contracts. In addition,

[[Page 14454]]

the Commission proposed a 100 contract reporting level for any contract 
having one of the other foreign currencies as a constituent part of a 
crossrate contract. The Commission explained that cross-rate contracts 
that are composed of two major currencies would also be considered to 
be a major currency. Finally, the Commission also proposed to list the 
reporting levels for the grains and soybeans in terms of contracts 
rather than bushels.\9\ The Commission estimated that:
---------------------------------------------------------------------------

\9\ As explained in the proposed rulemaking, ``prior to January 
1998, it was industry practice to express open interest and volume 
data, as well as required position reports, for the grain and 
soybean futures contracts, in terms of thousands of bushels. 
Beginning in 1998, however, industry practice for the grains and 
soybean contracts changed to express data for these contracts in 
contract units, which is consistent with the data for all other 
futures and option contracts.'' Id. Accordingly, the Commssion 
proposed to conform its reporting levels to this practice.

[T]hese proposed amendments to adjust reporting levels will 
decrease the number of daily position reports (i.e., CFTC Series '01 
Reports and CFTC Form 102s) required to be filed by reporting firms 
by about 14 percent. (The number of CFTC Form 40s required to be 
filed by large traders will also decrease). However, the percent of 
total market open interest reported through the large trader system 
would remain at the level deemed sufficient for rigorous market 
---------------------------------------------------------------------------
surveillance based upon the Commission's administrative experience.

Id. at 5202.
Both CBT and CME strongly objected to the Commission's proposal to 
raise these reporting levels. Specifically, CME opined that ``given 
that contract markets have primary responsibility for surveiling their 
markets, it is they, and not the Commission, that are best equipped to 
determine what reporting levels are adequate for effective 
surveillance.'' \10\ Similarly, CBT recommended that ``[i]nstead of 
raising the reportable levels for certain contracts, we recommend that 
the Commission consider deferring to the reportable levels adopted by 
the exchanges.'' \11\ In addition, both exchanges viewed the 
information generated through the prior reporting levels as 
``necessary.'' In this regard, CBT indicated that the information from 
large trader position reporting is ``extremely valuable'' to their 
financial surveillance activities. Further, CME stated that it ``does 
not intend to raise its reporting levels to correspond to the proposed 
increases. [CME believes that the Commission's projected decrease in 
daily position reports required to be filed by reporting firms will not 
occur, given that] clearing members will in fact be required to 
continue to report at the lower levels set by CME.'' \12\ Similarly, 
CBT remarked that it will probably retain the lower reporting levels 
currently set in its rules for certain commodities.
---------------------------------------------------------------------------

\10\ See the letter of April 14, 1999 from CME to the Commission 
(CME letter) at p. 2.
\11\ See the CBT letter at p. 2.
\12\ See the CME letter at p. 2.
---------------------------------------------------------------------------

Based upon thorough and careful consideration of the comments, as 
well as the Commission's most recent review of reporting levels, the 
Commission finds it appropriate to amend the reporting levels in 
certain domestic contracts, as well as modify reporting levels for 
foreign currencies, as proposed. These changes will reduce both the 
Commission's cost of collecting surveillance data and the cost of data 
filers. The exchanges may set their own reporting levels as they deem 
appropriate. The Commission is also listing the reporting levels for 
the grains and soybeans in terms of contracts rather than bushels, as 
proposed.\13\ The Commission is also deleting, as proposed, Rule 
15.03's separate reference to ``GNMA.''
---------------------------------------------------------------------------

\13\ As the Commission explained in the proposed rulemaking, it 
has been its ``long-standing administrative practice to set 
reporting levels by commodity and not by individual contract 
market.'' 64 FR 5202. Consistent with this practice, although 
contracts on the MidAmerica Commodity Exchange are smaller in size 
than those traded on other exchange, the Commission is not adjusting 
the reporting level for MACE contracts to compensate for the smaller 
bushel-size of its contracts. Therefore, a MACE trader's reporting 
level will be set at a lower absolute number of bushels underlying a 
reportable position on the exchanges that trade larger-size 
contracts.
---------------------------------------------------------------------------

B. Final Amendments to Special Account Information (CFTC Form 102)

Previously, Commission Rule 17.01(b)(3) required that a firm 
identify on CFTC Form 102, each pool, the pool's account number and 
name, as well as the name and location of the commodity pool for which 
the account controller trades. In addition, Commission Rule 17.01(c) 
required that a trader identify on a Form 102 the names and account 
numbers of all other separate accounts that the reporting trader 
controls or in which the trader has a ten percent or greater financial 
interest. (``other accounts'').\14\
---------------------------------------------------------------------------

\14\ For example, when an individual shares control of and has a 
financial interest in an account with one or more persons, and that 
individual also has his or her own account that he or she solely 
controls, these accounts would not be reported as a single account 
for special account/Form 102 reporting purposes. See, Commission 
Rule 17.00(b)(ii).
---------------------------------------------------------------------------

In proposing the amendment of Sec. 17.01 by deleting these 
information requirements under 17.01(b)(3) and (c), the Commission 
explained that this information is no longer needed for the ``operation 
of the Commission's surveillance data systems or by routine report from 
firms.'' Id. Specifically, the Commission explained that ``[t]hese 
requirements are duplicative of more complete information on account 
ownership and control filed by the traders themselves on CFTC Form 40, 
as required by Commission Rule 18.04.'' Id.
Both CBT and CME strongly disfavored the Commission's proposals to 
delete the information requirements under 17.01(b)(3) and (c) as 
described above. In particular, CBT and CME similarly stated that they 
rely on this information to perform effective market and financial 
surveillance. In addition, both exchanges pointed out that while this 
information may be supplied in the CFTC Form 40, the Form 40, unlike 
CFTC Form 102, is filed only with the Commission. Therefore, in 
removing the information on commodity pools and pool operators from the 
Form 102, the exchanges must obtain this information in some other 
manner. In this regard, CBT recommended that if the Commission 
implements the proposed changes to Form 102, it concurrently adopt 
procedures to provide the exchanges with copies of the Form 40 on a 
routine basis. In addition, CBT also questioned the necessity of the 
proposed changes to Commission Rule 17.01(b)(3) and Form 102 given that 
``the industry has been working on an electronic Form 102 to achieve 
the very same objective cited by the Commission of lessening the burden 
of reporting requirements.'' \15\
---------------------------------------------------------------------------

\15\ See the CBT letter at p.3.
---------------------------------------------------------------------------

After careful consideration of the comments, the Commission has 
determined to amend Sec. 17.01 as proposed. The Commission continues to 
believe that these amendments will reduce the reporting burden on the 
public and the processing workload of the Commission. The Commission 
notes here, as it did in the proposed rulemaking, that the:

[D]eletion of these routine requirements will not in any way affect 
the Commission's authority to obtain complete account information 
from either or both the firm and the individual trader in those 
individual cases where additional information is necessary to the 
Commission's conduct of market surveillance or to the enforcement of 
its rules. Nor does it affect the manner in which accounts are 
aggregated for calculation of compliance with speculative position 
limits and for other compliance purposes

64 FR 5202.
In amending Sec. 17.01 as proposed, the Commission noted the CBT's 
and the CME's respective concerns over their

[[Page 14455]]

ability to continue to obtain the information that no longer must be 
reported on CFTC Form 102. Accordingly, to ensure that all the 
exchanges will continue to have access to this information, the 
Commission will provide the exchanges with copies of CFTC Form 40s upon 
request.

C. Changes to Statement of Reporting Trader (CFTC form 40)

The Commission received no comments on its proposals to reorganize 
the CFTC Form 40 to present data in a more useful manner. The 
Commission believes it appropriate to revise its Form 40 as proposed. 
Accordingly, ``Schedule 1'' has been redesigned and now clarifies 
information regarding the reporting trader's hedging activities. This 
information includes the types of futures or options contracts used to 
hedge, the commercial occupations or merchandising activities of 
traders and the futures or option markets used for hedging. In 
addition, the data reflected on Schedule 1 has been reorganized, as 
proposed, to emphasize occupations and merchandising activities of the 
traders rather than the markets in which they trade.\16\ In addition, 
the Schedule 1 ``Investment Groups'' category has been divided, as 
proposed, into the following professionally managed funds 
subcategories: hedge funds, college endowments, managed accounts and 
commodity pools, trusts, foundations, pension funds, mutual funds and 
insurance companies. As the Commission explained in the proposed 
rulemaking, ``this reorganization [will] provide information of greater 
use for surveillance activities.'' Id. The revised Schedule 1 is 
included below.
---------------------------------------------------------------------------

\16\ The Commission also made changes to the list of 
merchandising activities to reflect those of greater surveillance 
importance to the Commission.
---------------------------------------------------------------------------

D. Deletion of Certain Contract Market Reporting Duties Imposed Under 
Part 16

In March 1999, the Commission completed its market surveillance 
software development to accommodate the receipt and processing of daily 
option large trader data directly from the firms, as well as software 
testing jointly with the firms. Also at that time, all firms began 
reporting this information directly to the Commission and exchanges 
were told that they no longer needed to provide the data to the 
Commission.\17\ Accordingly, the Commission is amending Part 16 of its 
rules by deleting, as proposed, Commission Rule 16.02, 17 CFR 16.02, 
under which each contract market was required to file weekly reports 
with the Commission containing the positions of each large trader in 
each option on futures contract. Similarly, the Commission is deleting, 
as proposed, Commission Rule 16.03, 17 CFR 16.03, under which each 
contract market was required to provide the Commission with account 
identification information regarding reportable option trader 
positions.
---------------------------------------------------------------------------

\17\ In this regard, in March 1999, the Acting Director of the 
Division, pursuant to the delegated authority described supra, 
issued letters to the exchanges informing them that the Commission 
will not take any enforcement action against them for not filing 
with the Commission the large option trader information required 
under Part 16 of the Commission's rules. All exchanges ceased filing 
this data at that time.

BILLING CODE 6351-01-P

[[Page 14456]]

[GRAPHIC] [TIFF OMITTED] TR17MR00.020


BILLING CODE 6351-01-C

[[Page 14457]]

IV. Related Matters

A. The Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., 
requires that agencies consider the impact of their rules on small 
businesses. The Commission has previously determined that large traders 
and FCMs are not ``small entities'' for purposes of the RFA. 47 FR 
18618-18621 (April 30, 1982). The final amendments to reporting 
requirements fall mainly upon FCMs. Similarly, foreign brokers and 
foreign traders report only if carrying or holding reportable, i.e., 
large positions. In addition, these final amendments relieve a 
regulatory burden. Accordingly, the Chairman, on behalf of the 
Commission, hereby certifies, pursuant to 5 U.S.C. 605(b), that the 
action taken herein will not have a significant economic impact on a 
substantial number of small entities.

B. Paperwork Reduction Act

Commission Rule 15.03 affects the collection requirements of Part 
17 and Part 18 rules. Former Commission Rules 16.02 and 16.03 contained 
information collection requirements. Commission Rule 17.01 contains 
information collection requirements. As the Paperwork Reduction Act of 
1995 (Pub. L. 104-13 (May 13, 1996)) requires, the Commission submitted 
a copy of these rules and the associated paperwork burden to the Office 
of Management and Budget (OMB) for its review (44 U.S.C. 3504(h)) and 
requested comments on the paperwork burden from the public. The 
Commission did not receive comments addressing this specific associated 
paperwork burden. The Commission did receive and address, however, 
comments concerning the information that would be collected under the 
proposed rules.
OMB previously approved the collection of information related to 
these rules as information collection (3038-0009), Large Trader 
Reports. The final rules the Commission adopted, which have been 
submitted to OMB for approval, have the following paperwork burden:
Number of respondents: 5,391.
Estimated average hours per response: .35.
Frequency of response: daily.
Number of responses per year: 70,940.
Annual reporting burden: 24,829.
This represents a reduction of 1,426 burden hours as a result of 
the rule changes adopted to increase the reporting levels. Persons 
wishing to comment on the paperwork burden contained in the final rules 
may contact the Desk Officer, CFTC, Office of Management and Budget, 
Room 10202, NEOB, Washington, DC 20503, (202) 395-7340. Copies of the 
information collection submission to OMB are available from the CFTC 
Clearance Officer, 1155 21st Street, NW, Washington, DC 20581, (202) 
418-5160.

List of Subjects

17 CFR Part 15

Brokers, Reporting and recordkeeping requirements.

17 CFR Part 16

Commodity futures, Reporting and recordkeeping requirements.

17 CFR Part 17

Brokers, Commodity futures, Reporting and recordkeeping 
requirements.

In consideration of the foregoing, and pursuant to the authority 
contained in the Act, and, in particular, sections 4g, 4i, 5 and 8a of 
the Act, 7 U.S.C. 6g, 6i, 7 and 12a (1994), the Commission hereby 
amends Parts 15, 16 and 17 of Chapter I of Title 17 of the Code of 
Federal Regulations as follows:



PART 17--REPORTS BY FUTURES COMMISSION MERCHANTS, MEMBERS OF 
CONTRACT MARKETS AND FOREIGN BROKERS

5. The authority citation for part 17 continues to read as follows:

Authority: 7 U.S.C. 6a, 6c, 6d, 6f, 6g, 6i, 7 and 12a unless 
otherwise noted.

6. Sec. 17.01 is amended by removing and reserving paragraphs 
(b)(3)(ii) and (c) and by revising paragraph (b)(3)(iii) to read as 
follows:


Sec. 17.01 Special account designation and identification.

* * * * *
(b) * * *
(3) * * *
(ii) [Reserved].
(iii) If fewer than ten accounts are under control of the 
independent advisor, for each account the account number and the name 
and location of each person having a ten percent or more financial 
interest in the account; and
(c) [Reserved].
* * * * *

Issued in Washington, D.C., this 8th day of March 2000 by the 
Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 00-6345 Filed 3-16-00; 8:45 am]
BILLING CODE 6351-01-P

The Commodity Futures Trading Commission (CFTC) summarizes weekly, and releases biweekly, data on the open interest for markets in which five or more traders hold positions equal to or above the reporting levels established by the Commission. The tables show open interest separately by reportable and non-reportable positions. For reportable positions, additional data are provided on commercial and noncommercial holdings, spreading and numbers of traders.

The information reported to the CFTC by the FCM when an special account has a position meeting these requirements includes: Name Address Business phone Account number Business or occupation Type of account Account controller Name and address of anyone with a 10% financial interest in such account Position, deliveries, hedges, etc This information is reported on CFTC Form 102.

Explanatory Notes

Open Interest -A futures contract is said to be ``open'' when it has been entered into and not yet liquidated by an offsetting transaction or fulfilled by delivery. Contracts that are open are referred to as ``Open Interest.'' The aggregate of all long open interest is equal to the aggregate of all short open interest.

Open interest as reported to the Commission and as used in the COT Report does not include open futures contracts against which notices of deliveries have been stopped by a trader or issued by the clearing organization of an exchange. Open interest held or controlled by a trader is referred to as that trader's futures position.

Reportable Positions - Clearing members, futures commission merchants (FCMs), and foreignbrokers are required to make daily reports to the Commission showing each trader's positions on their books that, in any future month of a commodity, exceed the reporting level. Open interest figures show the aggregate positions reported by all clearing members, FCMs, and foreign brokers. Positions of individual traders are classified either as ``commercial'' or ``noncommercial.'' All of a trader's reported futures positions in a commodity are classified as commercial if the trader uses futures contracts traded in the particular commodity for hedging as defined in the Commission's regulations.

Non-reportable Positions - Traders' positions that are below the reporting level are classified as ``non-reportable.'' The aggregate long and short open interest shown as non-reportable positions are derived by subtracting reported positions from the total open interest. Accordingly, for non- reportable positions, the number of traders involved and the commercial/noncommercial classification of each trader are unknown.

Spreading - In ``All'' futures, spreading includes each trader's reported long and short positions in the same market to the extent they are balanced. These figures do not include intermarket spreading.

Changes in Commitments from Previous Reports - Changes represent the differences between the data for the current report and the previous report, including any adjustments made since the previous report was published.

Percentages of Open Interest; Number of Traders - In determining the total number of traders, a trader's long and/or short position is counted only once regardless if the trader appears in more than one category (noncommercial long or short only, noncommercial spreading, and commercial). In determining the number of traders in each category, a trader is counted as long and/or short for each category in which the trader holds a position.

This Web site contains a listing of  the "12 Week Summary of the Net Commercial Positions in selected markets. Markets are identified as "on watch"  when the net commercial position is within 95% of their 5 year record. (The "v" or "v-" following the net position in the 12 week summary  indicates if the net position is within 95% of the high of the five year range indicating a buy signal watch, or within 5% of the low of the five year range indicating a sell signal watch.)

Consider trades using "technical signals" to identify a possible change in trend following the direction of the net commercial position. If the trend has turned, consider the possibility that the trend following Large Specs might begin to reverse their positions, and push the market in the direction of the net Commercial position.

Consider the following trading strategy:  A market is considered "on watch" when the net commercial position is within 95% of it's 5 year record net long or net short in the past six weeks. For a market that is on  "buy watch", enter a buy trade on a breakout above the previous two week high.  For a "sell alert", enter a sell on a breakout below the two week low. On "buy trades", trail your stop $60 to $80 per contract below the two week low (above the two week high for sell trades). Adjust your entry levels and stops levels each Monday based on the previous two weeks. Consider exiting an open trade when it goes "off watch" (more than six weeks since the net position was within 95% of the 5 year record net position, three to four weeks for currencies), or use the trailing stop as the exit.

In the currency markets, I suggest you consider the net commercial position as a market direction "watch indicator" only for three or four weeks after the net position begins to reduce from the record or near record levels. The commercials in the currency markets are generally the international banks providing liquidity to the futures markets through cash market arbitrage. They buy or sell futures versus the cash market for an arbitrage profit of fractions of a tick. The record, or near five year record , net position is not necessarily a statement by the commercials that a given currency market is cheap or dear, but rather a statement that the trend has been in place long enough for the commercials to have built arbitrage positions to levels near where in the past the market has reversed long enough to allow the net commercial position to move in the other direction.