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The London Metal Exchange (LME) today published its first Commitments of Traders Report (COTR) in response to general market demand for broader transparency. The COTR is designed to reflect the nature of the predominant business activity that LME members and their clients are involved in.
“We are committed to providing the broadest possible market transparency for the metals industry,” said Nick Ong-Seng, Managing Director of Regulation and Compliance at the LME.
“As such we have endeavoured to produce a report in line with the industry standard, which reflects as accurately as possible the breakdown of open interest in contracts traded on the LME, summarised in five discrete classifications.”
“The publication of these reports represents a key deliverable requested by the physical industry following the LME's 2013 warehousing consultation,” said Matthew Chamberlain, the LME’s Head of Business Development. “The reports demonstrate the strong participation of those producers, merchants, processors and users in the LME's ecosystem – both holding open interest directly as clients, but also to a large extent through broker-dealers, much of whose open interest relates to netted physical client business.”
“The COTR data reflects the LME's target business model – namely a price underpinned by the core involvement of the physical market hedging their risk, with liquidity enhanced by the participation of the broader financial community.”
The report is designed to be viewed in conjunction with the existing daily warrant banding reports published each day by the LME in accordance with its Lending Guidance.
The COTR will be published on a weekly basis and will consist of a report for each business day of the previous week.
Background
The COTR classifications defined by the LME follow the categorisation definitions as below:
(a) Producer / Merchant / Processor / User
Entities that are predominantly engaged in production, processing, packaging or handling of metal and that use the LME to manage or hedge risks associated with those activities.
(b) Broker Dealer / Index Trader
Entities that are engaged in transactions for a metal, and that use the LME to manage or hedge the risk associated with those transactions. The Dealer’s counterparties may be speculative traders or traditional commercial Clients that are managing risk arising from their dealings in the physical market. This categorisation is referred to as Swap Dealer in the U.S market.
(c) Money Manager
Entities that are engaged in managing and conducting LME contracts on behalf of underlying Clients such as investment fund firms.
(d) Other Reportables
Every other reportable entity that is not placed into one of the three categories above is placed into the “other reportables” category.
(e) Not Defined
Used for entities which have not yet been grouped, for administrative / timing reasons. The LME reconciles these positions regularly, so expects only small numbers in this category.
Each section of the COTR details positions per metal, and within each metal the report is set out as follows:
(a) CLASSIFICATION: the pre-determined categorisation of members and clients depending on the given entity’s main business function.
(b) TOTAL OPEN INTEREST: the total open futures positions on LME traded contracts and delta equivalent traded option positions per classification.
(c) TOTAL NUMBER OF SHORTS: the total number of open short positions per classification.
(d) SHORT POSITION CHANGE: the calculated daily change of total open short positions per classification.
(e) % OF TOTAL OPEN INTEREST (S): the total number of open short positions as a % of total open interest.
(f) TOTAL NUMBER OF LONGS: the total number of open long positions per classification.
(g) LONG POSITION CHANGE: the calculated daily change of total open long positions per classification.
(h) % OF TOTAL OPEN INTEREST (L): the total number of open long positions as a % of total open interest.
(i) TOTAL NET POSITION: total net position of open long and short positions.
(j) NET POSITION CHANGE: the calculated daily change of total net position.
(k) TOTAL NUMBER OF ENTITIES: the total number of members and clients per classification.
