Crude oil futures traders: Who is watching whom?
DOI:
https://doi.org/10.15173/esr.v19i2.538Keywords:
Speculation, Oil, Swap Dealer,Abstract
We test for the pair-wise Granger type causality between the net long positions of crude oil futures traders, as categorized by the CTFC. Our results leads us to conclude that: 1) the Swap Dealer category behaves as a speculator because it monitors (or causes) the changes in the net long positions of all other traders and trades accordingly; 2) the Producer/Merchant group behaves as a hedger because it makes the trading decisions without the influence of other traders, 3) the Money Manager group behaves as an investor because it’s always net long crude oil futures and makes the trading decisions without the influence of other traders, and 4) the Other Reportable and Nonreportable groups, which represent retail traders and smaller accounts, act mostly as noise traders. Thus, this study provides some support for the increased regulation of Swap Dealers under the Dodd-Frank Act and the Volcker rules.
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