The Commodity Futures Trading Commission (Commission or CFTC) publishes the Commitments of Traders (COT) reports to help the public understand market dynamics. Specifically, the COT reports provide a breakdown of each Tuesday’s open interest for futures and options on futures markets in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC.
Generally, the data in the COT reports is from Tuesday and released Friday. The CFTC receives the data from the reporting firms on Wednesday morning and then corrects and verifies the data for release by Friday afternoon at 3:30PM ET.
The CFTC classifies traders based on their trading activity and purpose, not necessarily on their organizational structure. Therefore, a single financial institution might have some divisions classified as commercial (hedging) and others classified as non-commercial (speculating).
In the context of SP500 futures, "commercials" in the COT report refer to institutional investors and entities that use the futures market to manage risk related to their underlying business activities. These traders are not primarily speculating on price movements but are using futures contracts to hedge their exposure to the SP500 related assets.
These commercial are large institutions: Banks, pension funds, and mutual funds that manage significant portfolios and use futures to hedge against market volatility. Their trading decisions are typically based on long-term investment strategies rather than short-term speculation.
In the SP500 futures market, "non-commercial traders", also known as large speculators, are primarily composed of managed money like hedge funds or trading desk divisions within financial institutions that trade on their own account and may use futures for speculative purposes only.
The non-commercial category is significant because their positions often reflect market sentiment and can provide insights into potential future price movements. When non-commercial traders are heavily net long (betting on price increases), it can be seen as a bullish signal, while a net short position (betting on price decreases) can be bearish.
Small speculators, also known as "non-reportables" are individual traders or smaller firms who are not classified as institutionals (commercials) or large speculators (non-commercials) who manage other people money. They trade with their own money.
They are non-reportables because they don’t meet the position size required. The “nonreportable” open interest is determined by subtracting the open interest of the “commercial traders” plus “non-commercial traders” from the total open interest in that market.
As a rule, the aggregate of all traders positions reported to the CFTC represents 70 to 90 percent of the total open interest in any market.
