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Major world venues for gold, silver and copper trading


									                                                                        Statement of
                                                                       Steve Sherrod
                                                              Acting Director of Surveillance
                                                               Division of Market Oversight
                                                           Commodity Futures Trading Commission
                                                                      March 25, 2010

Good morning Mr. Chairman, Commissioners. This morning I will present two sets of general
statistical information regarding gold, silver and copper markets. The first set of information is a
summary of trading volume in select major metals markets in 2009. The second set of information
provides a view of large traders and concentration in these markets during a sample time period.
That information includes aggregate statistics derived from the CFTC’s Large Trader Reporting
System. By way of reminder, Section 8 of the Commodity Exchange Act generally does not permit
the Commission to publish data and information that would separately disclose the business
transactions or market positions of any person and trade secrets or names of customers. 7 U.S.C. 12.

I.             Trading Volume

Gold, silver and copper are traded around the world on many exchanges.

                Major world venues for gold, silver and copper trading
                                                     Switzerland                  Russia               China                Gold futures
                                                      Gold OTC                Gold futures          Gold futures            Silver futures
                                                      Silver OTC              Silver futures       Copper futures           Gold options

      United States
       Gold futures                                  United Kingdom
      Silver futures                                 Copper futures
                                                     Copper options                                                                          South Korea
     Copper futures
                                                        Gold OTC                                                                              Hong Kong
      Gold options
                                                       Silver OTC                                                                            Gold futures
      Silver options
                                                      Copper OTC                                                                               Taiwan
     Copper options
                                                                                                                                             Gold futures
         Gold OTC
                                                                                                                                             Gold options
        Silver OTC                                                     Turkey
       Copper OTC                                                    Gold futures
                                                                    Dubai, UAE                                      Gold futures
                                                                   Gold futures
                                                                   Silver futures                           India
                                                                   Gold options                        Gold futures
                                                                                                       Silver futures
                                                                                                      Copper futures
                                                                                    South Africa
                                                                                    Gold futures

 Source: Futures Industry Association (FIA); various exchange websites

Gold: Price discovery in gold markets occurs around the world. Of the 2009 gold trading volume in
cash, forward and futures contracts for six major gold markets, the London Bullion Market
Association (LBMA) accounted for about half and the Commodity Exchange, Inc. (COMEX, part of
the CME Group) accounted for about one-third. The data in the chart (below) does not include
options, which generally have comprised a small part of the trading volume. The six markets are:
the LBMA; COMEX; the Multi Commodity Exchange of India, Ltd. (MCX); the Tokyo Commodity
Exchange (TOCOM); the Shanghai Futures Exchange (SHFE); and NYSE Liffe U.S. (NYSE Liffe).
The trading volume of these six venues is presented in terms of millions of troy ounces and as a
percentage of the aggregate volume for these six venues.

LBMA forward contracts and COMEX futures contracts are close economic substitutes, trading in
central markets with visible prices. LBMA trades cash spot and forward gold contracts, most of
which are for delivery within 90 days. COMEX trades futures contracts. Most COMEX futures
trading occurs in contracts that are within 90 days of delivery.

    Gold: Futures Volumes by Major Exchange (2009, millions of troy ounces)

                  Sources: Futures Industry Association (FIA), Exchanges, London Bullion Market Association (LBMA)

Silver: Turning to silver, the pie chart (below) illustrates the 2009 trading volume of five venues in
terms of millions of troy ounces and as a percentage of the aggregate volume for these venues.
(SHFE did not list a silver contract.) COMEX accounted for about half and LBMA accounts for
about one-third of the volume.

   Silver: Futures Volumes by Major Exchange (2009, millions of troy ounces)

                   Sources: Futures Industry Association (FIA), Exchanges, London Bullion Market Association (LBMA)

Copper: In copper futures markets in 2009, the pie chart (below) provides the futures trading
volume of four venues in terms of millions of tonnes (that is, 1,000 kilograms) and as a percentage of
the aggregate volume for these venues. The London Metal Exchange (or LME) accounts for over
half, SHFE accounts for over one-third, and COMEX accounts for only a sliver of the 2009 volume.

     Copper: Futures Volumes by Major Exchange (2009, millions of tonnes)

                                                           Source: Futures Industry Association (FIA)

II.    Aggregated Data for US Reporting Markets: COMEX and NYSE Liffe

The Commission collects reports every day about persons who hold or control futures and options
positions that, at the close of the market, exceed reporting levels set forth in Commission Regulation
15.03. 17 CFR 15.03. The current reporting level for gold is 200 contracts. The level for silver is
150 contracts. And the level for copper is 100 contracts. Commission staff uses the reportable
position data in our surveillance program.

Commitments of Traders: To provide transparency to the public in the form of aggregate
statistics, CFTC publishes the Commitments of Traders (COT) report for 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. Those reports are available on
(See, in particular, and

Staff used historical data from the public Disaggregated COT Reports to produce charts (below)
showing the net position by the four trader classifications for the two most recent calendar years
and through March 16, 2010 (as of date for the most recent report). The four trader
classifications are: Producer/Merchant/Processor/User; Swap Dealers; Managed Money; and
Other Reportables.

Bank Participation Report: Also to provide transparency to the public, CFTC publishes the
Bank Participation Report (BPR) on a monthly basis. The BPR includes data for every market
where five or more banks hold reportable positions. For purposes of protecting the
confidentiality of participants’ market positions (as required under section 8 of the Commodity
Exchange Act) when the number of banks in either category (U.S. Banks or Non-U.S. Banks) is
less than four, the number of banks in each of the two categories is omitted and only the total
number of banks is shown for that market.

Staff used historical data from the public BPR to produce charts (below) of the gross futures
positions and, separately, the gross option positions (not delta adjusted) for the past two and one-
quarter year period.

CFTC staff generally does not provide an analysis of COT Reports or BPRs. However, as an
example of how one might use COT Reports and the BPR together, I had staff overlay the silver
COT chart with the silver BPR chart (below). (The bar chart for the BPR repeats the monthly
data point each week until the next monthly BPR is published.) I note there is one month, August
2008, where a large increase occurred in the reported short position for U.S. banks in the BPR.

It has been widely inferred and reported by others that one trader dramatically increased its short
position in August 2008. Since for every short there must be a long, one might expect there
would be an increase in the short or long positions reported in the COT. However, there is not a
large change of the same magnitude in the aggregate long or short positions in the COT
classifications. There also was not a significant change in open interest during the period of July
and August 2008.

There are alternative explanations that would result in a reported increase in short open interest
in the BPR, without corresponding changes in the aggregate positions in the COT or open
interest. I offer two possibilities:

One could explain a change in short open interest on the BPR by a change within the
classification system; if the usage code changed from non-bank to bank for a trader with a short
position, then an increase in the short open interest would appear on the BPR, without any
change in the COT Report.

Another explanation would be a merger or acquisition where a bank assumes the position of a
non-bank entity, both of whom were under the same commercial classification. That may not
result in a change in open interest and may not result in a change in aggregate position within a
COT classification. But it may result in an increase in the reported position on the BPR.

As I noted at the beginning of this presentation, Section 8 of the Commodity Exchange Act
generally does not permit the Commission to publish data and information that would separately
disclose the business transactions or market positions of any person and trade secrets or names of
customers. So, I can do no more than offer these alternative explanations.

Index Investment Data: The CFTC has provided additional information to the public regarding
index investment data on a quarterly basis. CFTC obtained this data from special calls on swap
dealers. The charts (below) show data by category for the quarter ends from December 2007
through December 2009 and for select contracts as of December 2009. The metals category
represents a relatively small notional amount, in comparison to the energy category.

                           Special Call Commodity Index Exposure by Category 
                                        Quarterly Notional Net Dollar Values 




 $ billions



              80        Grains/Soy

                        Other Energies 
                        WTI Crude Oil

                    Dec‐07 Mar‐08    Jun‐08     Sep‐08   Dec‐08 Mar‐09        Jun‐09      Sep‐09     Dec‐09
                                                                     Source: CFTC Quarterly Index Investment Data

                   Notional Value of Index Investment in Selected U.S. Futures Markets
                                        (as at December 31, 2009)                  Long          Short



$ billions






                                                                Source: CFTC Quarterly Index Investment Data

Traders over position accountability levels at COMEX and NYSE Liffe: Looking behind the
public Disaggregated COT Report data, the chart (below) provides a summary of traders that
held positions at or above the position accountability levels at either COMEX or NYSE Liffe
(including its predecessor exchange) during a sample period of January 1, 2008, through March
16, 2010. For example, in gold for all months combined and for a trader’s net futures and delta-
adjusted options combined position, 56 traders exceeded the position accountability levels on
one or more days during the two and one-quarter year sample period. The maximum number of
traders holding positions in gold at or above the position accountability level on any one day was
26. 17 traders on average exceeded accountability levels for an average of 34 Tuesdays of the
115 Tuesdays in the sample period. The average position while over accountability levels was
20,233 contracts.

Summary of Traders At Or Above Position Accountability Levels
 January 1, 2008 to M arch 16, 2010 (T ue sdays O nly)

                                                                          Max # of  Avg # of   Avg # 
                           Accountability Level              Traders In                                 Position 
   Market                                                                Traders in  Traders  Days Per 
                              (# Contracts)                    Period                                         Of 
                                                                           a Day     Each Day Trader *
Gold              Single Month                       6,000       56          26         17       34         14,350
                  All Months Combined                6,000       56          26         17       34         20,233
Silver            Single Month                       6,000       9            7         3        35           9,395
                  All Months Combined                6,000       8            6         3        45         15,463
Copper            Single Month                       5,000       13          11         5        42           8,336
                  All Months Combined                5,000       18          11         7        43           9,262
* Note that there are 115 Tuesdays in the period.

As is the case for the COT reports, this sample period is for Tuesdays only. There were 115
Tuesdays in the sample period. The aggregate statistics provide two different categories per
market. First, we identify traders holding positions in excess of the single month position
accountability level. And second, we identify traders holding positions in excess of the all
month position accountability level. The columns show: the unique number of traders at or
above the position accountability level in each of these markets during the sample period; the
maximum number of traders on any particular Tuesday over the position accountability level; the
average number of traders over the position accountability levels for all 115 days in the sample
period; the average number of days each such trader was over during the sample period; and the
average position of traders when over the position accountability level.

Additional Concentration Data: The four charts (below) provide aggregate data for the top 4
owners in select commodities. For comparison purposes, concentration measures are provided
for metals contracts, Chicago Board of Trade corn and wheat contracts, the Chicago Mercantile
Exchange S&P 500 stock index contracts, and the energy commodities by the referenced energy
contracts defined in the Commission’s Notice of Proposed Rulemaking of January 26, 2010. The
charts cover the same sample period (January 1, 2008, through March 16, 2010) and show data
in a Tuesday only format, like that of the COT Reports.

I note this data is aggregated at the owner level, rather than the trader level. The charts provide
not only the net long and net short positions of the top 4 owners, but also show gross long and
gross short positions of the top 4 owners separately.

It is evident that the concentration levels for the top 4 traders in gold, silver and copper generally
are higher than those in other contracts on the short side of the market.


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