The large trader reporting program is another system closely related to the position limit system to control the trading crisis and prevent the large traders from manipulating the midfield. When the speculative position of a member or client of a certain type of contract reaches more than 80% (including this amount) of the speculative position limit specified by the exchange, it must be reported to the exchange. The contents of the declaration include the customer's account opening, transaction, source of funds, and trading motives, etc., so that exchanges can review large investors for excessive speculation and market manipulation, as well as their trading crisis.
Since the earliest days of federal regulation of commodity futures trading, Congress has made preventing price manipulation an urgent purpose of regulation. Established in 1975, the Commodity Futures Trading Commission (CFTC) is an independent regulator that regulates futures trading in the United States. The new agency has a broad scope of supervision, including domestic and international agricultural and metal futures markets and emerging futures markets such as finance and energy. With such a heavy responsibility, the CFTC itself is a relatively small regulator, so it has relied on the large trader reporting program as an equalizer.
The large trader reporting program is an efficient tool that allows regulators to keep track of the positions of all large holders that may be causing market price manipulation. When markets are operating normally, high price volatility can create the appearance of price manipulation. When market regulation can be implemented accurately, public policy will improve to maximize the detection of market problems. When there is no evidence of such a problem in the market, it seeks to minimize the effect of regulation on the market. In addition, the system can also provide the CFTC with useful information about the composition of the market, such as commercial and non-commercial traders among market participants, and positions held by certain types of investors, such as spot traders, swap traders, producers, manufacturers and traders of managed funds.
Under the large trader reporting program, futures commission merchants and foreign brokers (known as "reporting firms") are required to submit daily reports to the CFTC on futures or options positions in their accounts that equal or exceed a specific level set by the CFTC. This reporting level varies by market, with a small market requiring reporting above 25 lots, while a large market like the CME Eurodollar futures market has a reporting limit of 3,000 lots. The sum of the data presented in these reports usually accounts for 70%-90% of the total positions in the market. Reporting levels are determined based on the following factors: total open interest, size of positions held by traders, regulatory history, size of delivery supply in the physical delivery market. The CFTC periodically reviews this information to determine whether this reported level provides sufficient open interest.
In addition to data on positions, daily reports include delivery notifications and futures conversions (eg, futures-to-spot, futures-to-swap, etc.). As one possible scenario, the amount of information reported to the CFTC has grown significantly over the past few years as the futures industry has progressed.
The CFTC uses a variety of means to ensure the accuracy of large account data. The large trader data of each reporting firm is cross-checked daily with the total position information of the clearing members provided by the exchange. Based on the analysis of any inconsistencies between the two sets of data, an investigation may be conducted on the reporting firm or exchange to eliminate any reporting issues. In addition, members of the market surveillance team regularly conduct on-site audits of reporting firms and compare the data obtained on-site with the data these companies submit to the CFTC.
