SUPPLEMENTARY INFORMATION:

I. Background

The Commission is requesting public comment on the Commitments of Traders Reports (“COT Reports”). This request for comment provides background on the history, purpose, data, and evolution of the COT Reports program, outlines changes in market structure affecting the reports, and poses specific questions regarding potential future modifications. Public comment for the Commission's review of its practices with respect to the COT Reports will provide the Commission with valuable information and perspective as it evaluates potential modifications to its COT Reports procedures.

A. COT Reports and Public Information

The Commission, and its predecessor entities, have long sought to provide the public with information related to the futures markets. Beginning with an intent to provide the public with comprehensive information regarding trading in grain futures, the Commission has enhanced its publication of market information over time to include more contract markets and more frequent publication. Although there is no statutory or regulatory mandated requirement for the Commission to publish the COT Reports, the Commission has received feedback indicating that the report generally provides valuable information to market participants.^[1] This request for comment continues a series of efforts by the Commission to maintain an information system that reflects changing market conditions, and to provide the public with useful information regarding futures and options markets.

B. History and Evolution of the COT Reports, Marketplace

1. Background

In 2006, the Commission undertook a comprehensive review of its ( printed page 24208) Commitments of Traders Program.^[2] In that review, the Commission discussed at length the history, development, and evolution of the COT Reports ^[3] and sought feedback from market participants on possible changes to the COT reporting system.^[4]

The COT Reports provide the public and market participants with information related to open interest in the futures and options markets. Typically, although not in all cases, the Commission includes futures and options markets on the COT Reports when there are twenty or more traders that hold positions above a certain large trader threshold. Currently, the Commission generally publishes the COT Reports on Friday afternoons. The published data is based on Tuesday position data that is sent to the Commission by reporting firms on Wednesday. Although position data is supplied by reporting firms (FCMs, clearing members, foreign brokers and exchanges), the actual trader category or classification is based on the predominant business purpose self-reported by traders on the CFTC Form 40 and subject to review by CFTC staff.^[5]

The originating predecessor report to today's COT Reports was first issued by the Grain Futures Administration. This report endeavored to provide comprehensive information regarding trading in grain futures.^[6] As part of that effort, the report included a distinction between speculative and hedging positions that was derived from the Administration's collection of information from traders as to whether they were engaged in the cash grain business.^[7]

The Commodity Exchange Authority subsequently began a practice of publishing regular, periodic COT Reports.^[8] These reports began as monthly publications published roughly two weeks after the end of the preceding month. Since that time, the publication of the COT Reports has iteratively, over time evolved to be published more frequently, based on more recent position data, and cover more commodity contract markets. The COT Reports also moved from fee-based access to being freely available on the Commission's website.^[9] In addition, due to changes to the Commission's collections of information, the classification made in the reports of speculative and hedging positions was no longer included. Rather, reportable positions were classified as commercial or non-commercial.^[10]

2. Addition of the Supplemental Report

In January 2007, the Commission began publishing a new weekly COT Report, entitled “COT—Supplemental” (“Supplemental Report”). The Supplemental Report includes select agricultural commodity contracts for combined futures and options positions. The Supplemental Report adds a third classification of trader, index traders, and breaks down the reportable open interest positions into: non-commercial, commercial, and index traders. The non-commercial category includes positions of managed funds, pension funds, and other investors that are generally seeking exposure to a broad index of commodity prices as an asset class in an unleveraged and passively managed manner. The commercial category includes positions for entities whose trading predominantly reflects hedging of over-the-counter transactions involving commodity indices. For example, a swap dealer holding long futures positions to hedge a short commodity index exposure opposite institutional traders, such as pension funds.

All of these traders—whether coming from the non-commercial or commercial categories—are generally replicating a commodity index by establishing long futures positions in the component markets and then rolling those positions forward from future to future using a fixed methodology. Some traders assigned to the index traders category are engaged in other futures activity that could not be disaggregated. As a result, the index traders category, which is typically made up of traders with long-only futures positions replicating an index, will include some long and short positions where traders have multi-dimensional trading activities, the preponderance of which is index trading. Likewise, the index traders category will not include some traders who are engaged in index trading, but for whom it does not represent a substantial part of their overall trading activity.

3. Disaggregated COT

The Commission began publishing a Disaggregated Commitments of Traders Report on September 4, 2009 (“Disaggregated COT Report”). The first iteration of the report covered 22 major physical commodity markets, with other physical commodity markets added later that year. The Disaggregated COT Report further modified the level of market transparency available in the COT Reports by separating traders into the following four categories of traders: Producer/Merchant/Processor/User; Swap Dealers; Managed Money; and Other Reportables, thus providing more granular classifications than the previous commercial and non-commercial categories.

4. CFTC Staff COT Reports Processes

Staff in the Divisions of Data (DOD) and Market Oversight (DMO) construct the COT Reports based on data collected pursuant to the Commission's large trader reporting program. As described sequentially below, DOD and DMO staff currently perform specific activities to create and publish accurate COT Reports.

Staff activities specific to the COT Reports generally begin on Wednesday mornings, when large trader position reports and associated special account identifications associated with the prior business day are received by the Commission.^[11] These large trader position reports and special account identifications are, if submitted in accordance with Commission data specifications, loaded into the Commission's data systems and made available to staff.

DOD staff review the data and account identifications reported to the Commission using purpose-built automated tools designed to identify potentially missing or erroneous data and identifications. DOD staff then contact, via email and/or phone, individual firms and request that they investigate and resolve the potential discrepancies identified by staff. Firms contacted by DOD staff generally begin to submit corrected or previously missing data on Wednesday. For missing account identifications, many ( printed page 24209) firms collect and verify the requested information internally on Wednesday and include it in their scheduled batch submission of data to the Commission on Thursday morning. In addition, foreign firms contacted by DOD staff generally do not begin to submit corrected or previously missing data until Thursday.

Also on Wednesdays, DMO staff begin to review and make any necessary corrections to data representing the trader classifications of owner(s) and controller(s) of special accounts associated with positions that will be represented on the COT Reports.^[12]

On Thursdays, the Commission continues to receive corrected data and account identifications. Newly submitted data is subject to the processes noted above to identify potential discrepancies, missing data, and to determine trader classifications. Staff engage with reporting firms and traders throughout Thursday, and sometimes into Friday, regarding certain identified missing or potentially erroneous data.

On Thursday, DOD staff continue review newly received data while also undertaking a comprehensive validation process on the reports that includes verifying aggregated positions and analyzing the reasonableness of position trends over time. Validated data is passed to Commission subject matter experts in the DMO for further review. These review processes continue into Thursday afternoon as DMO subject matter experts iteratively analyze the data, make modifications necessary to correct any trader classifications, and, when they are satisfied with the accuracy of the report, approve the COT Reports data for publication.

On Friday morning, CFTC staff responsible for the Commission's website prepare the COT Reports for publication. Commission subject matter experts in the DMO again review and approve the COT Reports in their final publication form. The Reports in their final publication form are embargoed and ultimately published at 3:30 p.m. ET on Friday.

Since October 2022, the Commission has also simultaneously published the COT Reports data to a public reporting environment. CFTC's Public Reporting Environment, available at: https://publicreporting.cftc.gov/​, was intended to further support industry professionals needing to customize, search, filter, analyze, and download COT Reports data. The Public Reporting Environment allows users to freely download COT Reports data for user-selected reporting dates and contract markets, as well as to use an application programming interface to access and download the COT Reports data.

II. General Request for Comment

In a continuation of its efforts to provide appropriate and useful information to the public and market participants, and in light of evolving markets and the introduction of new and innovative products, the CFTC is now seeking public comment concerning whether it should adopt any changes to the COT Reports. Commenters are invited to submit comments on COT Reports generally and to submit comments on the potential impacts of modifying the COT Reports publication. These impacts may include benefits and risks to markets and market participants, and commenters are encouraged to discuss these benefits and risks in their comments. Such modifications could be made as part of the CFTC's ongoing efforts both to maintain an information system that reflects changing market conditions, and to provide the public with useful information regarding futures and options markets.

III. Specific Requests for Comment

The CFTC has formulated the following questions based upon its initial review of issues relating to the COT Reports. Responses from interested parties will advance the CFTC's understanding of these issues and may result in modifications to the Commission's COT Report processes to resolve any problems that are identified regarding the COT Reports. Each enumerated question should be addressed individually. Interested parties are also welcome to address other topics or issues that they believe are relevant to the COT Reports.

1. Should the CFTC continue to publish the COT Reports on their current schedule?

2. More specifically, if the CFTC determined to publish the COT Reports on a more frequent basis:

(a) On what frequency and schedule (days of week or month) should the Reports be published and why?

(b) Currently, the COT Reports are published on Friday afternoon. Would the publication of a COT Reports on another day during the week increase any market impact associated with the Reports publication?

(c) If the Commission were to also publish COT Reports on a non-Friday day of the week, should the Commission consider other market events, such as options expirations, futures roll dates, or other market information release dates, when determining when to publish the COT Reports more frequently?

3. Could more frequent publication of the COT Reports increase certain risks for market participants? For example:

(a) Would more frequent publication increase the likelihood that market participants reading the reports would be able to deduce the identity of the position holders, or other proprietary information, from the Reports? ^[13]

(b) Could such persons use information gleaned from more frequent publication of the COT Reports to gain a trading advantage over the reported position holders?

4. If the CFTC determined to publish the COT Reports on a more frequent basis, should the CFTC make any additional changes to the report not discussed in response to Questions 2 and 3 above?

(a) Considering the data reporting and authorities under Part 15, Part 16, Part 17, Part 18, and Part 150 of the Commission's regulations: Are there data properties and trader updates that the Commission should consider that would impact a more frequent COT publication?

(b) Given the FAQ's ^[14] and the related policies regarding trader classification (#3) and corrected data (#6), what data properties and timelines should the Commission consider when considering a more frequent publication schedule?

5. Given the variety of market characteristics (trading hours, trader composition, volatility variables, market size, depth and the related derivatives), what factors should the Commission consider to facilitate a more frequent COT Reports publication schedule?

6. Should the CFTC continue to generally publish the COT Reports based on data from three business days prior ( i.e., Friday publication based on Tuesday close-of-business market positions)? ( printed page 24210)

7. More specifically, if the CFTC determined to publish the COT Reports based on more recent data:

(a) How recent should the data in the COT Reports be (for example, Friday publication based on Wednesday close-of-business market positions)?

(b) Would publication of the COT Reports using more recent data increase the likelihood that persons reading the reports would be able to deduce the identity of the position holders, or other proprietary information, from the reports? ^[15]

(c) Could such persons use information gleaned from more frequent publication of the COT Reports using more recent data to gain a trading advantage over the reported position holders?

(d) If the CFTC determined to publish the COT Reports based on more recent data, should the CFTC make any additional changes to the report not discussed in response to Questions 2, 3 and 4 above?

8. Should the CFTC include all futures and option contracts that have 20 or more traders on the COT Reports? Are there other measures that the Commission should use when evaluating whether to include a contract on the COT Reports?

9. Given the increased variety in the types of contracts and products traded on designated contract markets, are there any categories of contracts (for example, binary options) that should be included or excluded from the COT Reports? Why or why not?

10. The current COT Reports publication schedule provides Commission staff and reporting firms with time to identify and correct data quality issues as described at Section I.B.4 above. If the COT Reports were published based on more recent data, Commission staff and reporting firms would have less time to identify and correct data quality issues. How should the Commission consider the risk of decreased COT Reports data accuracy when determining whether to publish the COT Reports based on more recent data? Should the Commission consider changing existing staff processes that are described in Section I.B.4?

11. If the CFTC determines to publish the COT Reports either on a more frequent basis or using more recent data or both, but is prevented from doing so for a period of time due to a need to change its data flows or staff processes that may inhibit such publication on a more frequent basis or using more recent data, should the CFTC consider phasing in such enhancements? If so, how?

(a) Should the CFTC consider publishing additional COT Reports that are limited, for a period of time, to the categories of contracts that would provide the most benefit to the public? What would those categories of contracts be?

(b) Should the CFTC consider publishing additional COT Reports that are limited, for a period of time, to certain contents that would provide the most benefit to the public? What would those contents be?

(c) As a response to rapid market innovation, should the Commission consider a test or beta version by market or asset class? If so, what should the Commission consider for such a series of reports? Would the Commission need additional data that could contribute to such market transparency?

12. Should the CFTC consider the implementation timing of recently adopted modifications to its large trader reporting requirements when considering the timing of any changes to the COT Reports publication schedule? ^[16]

13. As noted in Section I.B.4, the CFTC currently provides an interactive Public Reporting Environment for COT Reports data. Regarding this interactive user interface,

(a) Does it provide value to the public?

(b) Should the CFTC continue to provide this service? Why or why not?

(c) Should the CFTC consider changes to its Public Reporting Environment? Why or why not?

Note:

The following appendix will not appear in the Code of Federal Regulations.

Review of the Commitments of Traders Reporting Program—Commission Voting Summary

On this matter, Chairman Selig voted in the affirmative. No Commissioner voted in the negative.

91 FR 24207