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EXPERT VIEW: Commitments of traders reports are not fit for purpose – Marex Spectron

October 30, 2013 - 16:16 GMT Location: London

KEYWORDS: Marex Spectron , Expert View , Vicky Sanders , commitment of traders , LME , aluminium , copper , CME

Amid expectations that the London Metal Exchange will produce its own commitments of traders (CoT) reports, Marex Spectron’s head of analytics sales, Vicky Sanders, cautions that such methods are no longer fit for purpose.

CoT reports were first produced as far back as 1924, and went monthly in the 1960s. The move was proclaimed as "another step forward in the policy of providing the public with current and basic data on futures market operations". Over 50 years on, and it’s a fair question to ask whether these reports still carry the same merit, or whether financial markets have passed them by. The reliance upon them as sources of information, and the esteem in which they are held, seems to emanate almost solely from historical practice. It is time to assess whether market participants can continue to believe they are well served by them. Financial markets have evolved considerably and, we would argue, beyond this methodology. Speed of delivery Even if the methodology were valid, the speed of delivery is positively archaic. Markets now trade at the speed of nanoseconds, which means that a weekly...

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