Category Archives: Commodities

CME Group to Launch Micro WTI Futures on July 12

CME Group, the world’s leading and most diverse derivatives marketplace, today announced it will expand its suite of micro-sized futures contracts with the introduction of Micro WTI futures.  The contracts are expected to launch on July 12, pending regulatory review.

Micro WTI futures will be one-tenth the size of the company’s global benchmark WTI Crude Oil futures contract and cash-settled. They will enable market participants – from institutions to sophisticated, active, individual traders – to fine-tune exposure to crude oil markets and enhance their trading strategies in an efficient, cost-effective way.

“As U.S. crude continues to gain global significance, we are seeing increasing demand for tools that help a broader range of clients access these markets,” said Peter Keavey, Global Head of Energy Products at CME Group. “WTI futures have always been a top product for active traders around the world, and the smaller size of Micro WTI futures will offer more flexibility and greater precision to market users – all while enabling them to benefit from the transparency and liquidity of the world’s most robust crude oil contract.”

“Interactive Brokers’ advantage has always been our low cost, advanced technology, and breadth of products offered,” said Steve Sanders, Executive Vice President, Marketing and Product Development at Interactive Brokers. “We are excited to add Micro WTI futures to our product roster, which will allow more of our sophisticated individual investor and active trader clients to participate in the global oil markets.”

“We continue to see demand from retail active traders for micro sized futures products like this that provide access to attractive markets with greater flexibility and efficiency,” said J.B. Mackenzie, Managing Director at TD Ameritrade Futures and Forex, LLC.  “The launch of Micro WTI futures brings the crude oil markets to our clients in a more cost-effective way and is one more tool to help our clients diversify their exposure and hone their trading strategies.”

“As a growing audience of self-directed investors and traders continues to gravitate to the futures markets, we are excited to introduce the new Micro WTI Crude Oil contracts to the NinjaTrader user community,” said Martin Franchi, CEO of NinjaTrader Group, LLC.  “The smaller contract size available through this product innovation will significantly increase accessibility for more traders to this dynamic market and the opportunities available through futures.”

“TradeStation Securities, Inc. is proud to continue our strong relationship with CME through the launch of Micro Crude Oil Futures. As a platform for retail and institutional investors, we’re excited to offer our clients access to U.S. crude at a lower barrier of entry,” said John Bartleman, President of TradeStation Group, Inc., TradeStation’s parent company. “As day-one supporters of this new product, we’re continuing to prioritize our clients access to the latest Futures products and technology.”

Micro WTI futures will be cash-settled based on the daily settlement price of NYMEX WTI futures. The contracts will be listed on and subject to the rules of NYMEX. For more information or for product specifications please see: https://cmegroup.com/micro-wti

As the world’s leading and most diverse derivatives marketplace, CME Group (www.cmegroup.com) enables clients to trade futures, options, cash and OTC markets, optimize portfolios, and analyze data – empowering market participants worldwide to efficiently manage risk and capture opportunities. CME Group exchanges offer the widest range of global benchmark products across all major asset classes based on interest ratesequity indexesforeign exchangeenergyagricultural products and metals.  The company offers futures and options on futures trading through the CME Globex® platform, fixed income trading via BrokerTec and foreign exchange trading on the EBS platform. In addition, it operates one of the world’s leading central counterparty clearing providers, CME Clearing. With a range of pre-and post-trade products and services underpinning the entire lifecycle of a trade, CME Group also offers optimization and reconciliation services through TriOptima, and trade processing services through Traiana.

Federal Court Orders Oregon Owner of Precious Metals Firm to Pay $1.3 Million to Victims of Fraudulent Precious Metals Scheme

The Commodity Futures Trading Commission today announced that the U.S. District Court for the Western District of Washington entered a consent order against Aaron Michael Scott of Portland, Oregon for fraud and misappropriation in connection with a precious metals scheme run by Scott and his now defunct company, BMC Worldwide, Inc. (d/b/a Blue Moon Coins).  The order requires Scott to pay $1,381,461.86 in restitution to defrauded customers. Additionally, the order prohibits Scott from further violations of the Commodity Exchange Act and CFTC Regulations and permanently bans him from registering with the CFTC and trading in any commodity interests.

Case Background

The order resolves a CFTC action against Scott for engaging in fraud and misappropriation in connection with a gold-and-silver scheme from at least October 2013 through April 2014. The case was filed on October 3, 2018. [See CFTC Press Release No. 7822-18]

The order finds that Scott and BMC fraudulently represented that BMC was a highly successful precious metals firm. As detailed in the order, Scott and BMC persuaded customers to purchase gold and silver from BMC by claiming that, among other things, they maintained an inventory of precious metals in stock and would fulfill a customer’s order from that inventory or would purchase precious metals from a supplier upon receipt of payment.

The order also states that Scott and BMC did not maintain an inventory of precious metals sufficient to fulfill customer orders and, in many cases, made no effort to secure the precious metals needed to fulfill customer orders. Instead, they misappropriated the vast majority of customer funds and used them to pay BMC’s operating expenses, invest in other businesses, pay unrelated debts, and refund disgruntled customers or fulfill other customer orders in the nature of a Ponzi scheme.

Parallel Criminal Action

In a separate, parallel criminal action, Scott pleaded guilty to wire fraud on November 1, 2018. [United States v. Scott, No. CR18-5500-RBL (W.D. WA.)]  The court sentenced Scott to four years in prison and three years of supervised release on April 5, 2019. The CFTC appreciates the assistance of the U.S. Attorney’s Office for the Western District of Washington.

The CFTC cautions that orders requiring repayment of funds to victims may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure wrongdoers are held accountable.

The Division of Enforcement staff members responsible for this case are Stephen Turley, Jenny Chapin, Brett Shanks, Jeff Le Riche, Christopher Reed, and Charles Marvine, as well as former staff members James Humphrey, Peter Riggs, and Jo Mettenburg. 

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CFTC’s Precious Metals Customer Fraud Advisory

The CFTC has issued several customer protection Fraud Advisories that provide the warning signs of fraud, including the Precious Metals Fraud Advisory, which alerts customers to precious metals fraud and lists simple ways to spot precious metals scams.

Also, before investing or trading with a firm, check the firm’s registration status and disciplinary history, if registered, with the National Futures Association. A company’s registration status can be found at: www.nfa.futures.org/basicnet.

Customers and other individuals can report suspicious activities or information, such as possible violations of commodity trading laws, to the Division of Enforcement via a toll-free hotline 866-FON-CFTC (866-366-2382), file a tip or complaint online, or contact the CFTC Whistleblower Office at whistleblower.gov. Whistleblowers are eligible to receive between 10 and 30 percent of the monetary sanctions collected paid from the CFTC Customer Protection Fund financed through monetary sanctions paid to the CFTC by violators of the Act.

Murban Crude Oil Futures – ADM

The Murban Crude Oil Future is a physically delivered contract, basis FOB Fujairah (ADNOC) loading terminal, UAE.

The contract will provide users with an effective hedging instrument for Arab Gulf crude oil and other grades trading into the Asia Pacific Region. The underlying physical market is for Murban crude oil available without the local Abu Dhabi resale restriction.

Trading Screen Product Name

Murban Crude Futures

Trading Screen Hub Name

Abu Dhabi

Product

Murban Crude Oil, as defined in the Exchange and Clearing House rules.

Contract Symbol

ADM

Contract Size

1,000 barrels

Unit of Trading

Any multiple of 1,000 barrels

Currency

US Dollars and cents

Trading Price Quotation

One cent ($0.01) per barrel

Settlement Price Quotation

One cent ($0.01) per barrel

Minimum Price Fluctuation

One cent ($0.01) per barrel

Last Trading Day

Trading in the prompt delivery month shall cease at 16:30 Singapore Prevailing Time on the last Trading Day of the second month preceding the delivery month.

If the day on which trading is due to cease is the Trading Day preceding New Year’s Day, then trading shall cease on the next preceding Trading Day.

Daily Settlement

The Daily Settlement Price will be published at 19:30 London Prevailing Time every Trading Day with the exception of the Last Trading Day where no such prices for the expiring contract month will be published.

The Daily Settlement Price is the volume weighted average price of trades between 19:28 and 19:30 London Prevailing Time, or as determined by the Exchange, as detailed within the Trading Procedures of the IFAD Rulebook.

Exchange Delivery Settlement Price

The final settlement price, as determined by the Exchange on the Last Trading Day of the expiring contract month, will be the Marker Price published at 16:30 Singapore Prevailing Time and shall be the basis for delivery.

Markers

The Exchange will publish daily Marker Prices at 16:30 Singapore Prevailing Time and 16:30 London Prevailing Time (or as otherwise determined and communicated by the Exchange from time to time).

Each Marker will be a volume weighted average price of trades in the one minute preceding the marker time and will be published for the front three contract months.

There will be no Marker Price published at 16:30 London Prevailing Time on the Last Trading Day for the expiring contract month.

Delivery Date

Delivery shall commence no earlier than the first Terminal Loading Day of the delivery month and no later than the third Terminal Loading Day prior to the end of the said delivery month. Futures delivery shall be completed within the delivery month.

Delivery Methods

Delivery shall be made by the Seller to the Buyer on a F.O.B. basis at the Fujairah (ADNOC) loading terminal and shall be made in accordance with all applicable State and local laws and regulations. Delivery is to be made into Buyer’s Vessel during the delivery month.

A loading volume tolerance of plus or minus 0.2% of the contract volume is permitted.

There is no specified minimum quantity of Murban Crude Oil to be delivered for the purposes of this Contract. However, parties should be made aware that in relation to each Vessel the Terminal Operator imposes a minimum loading requirement (which may be amended from time to time) of two hundred thousand (200,000) Barrels for deliveries at the Terminal.

For the purposes of complying with the minimum limit imposed by the Terminal Operator, Members may co-load Barrels resulting from over the counter (OTC) transactions with Exchange traded transactions relating to the Contract.

Contract Series

Up to 48 consecutive months

Business Days

ICE business days

MIC Code

IFAD

Clearing Venues

ICEU

MiFID II position limit regime

The EU has recently adopted amendments to the position limit regime for commodity derivatives in Directive 2014/65/EU (MiFID II), which in Norway has been implemented in Chapter 15 of the Securities Trading Act. The European Securities and Markets Authority (ESMA) has issued a statement on the consequences these changes should have for the supervisory follow-up of the commodity derivatives markets in the EU until they have been implemented in national law.

The amendments to the position limit regime are part of the EU’s ‘Capital Markets Recovery Package’ (CMRP), which aims to reduce the negative impact of the Covid-19 pandemic on the European financial market. An important reason for the amendments is that the current rules have proven to inhibit the development of new and less liquid commodity derivatives markets. In addition, there have been few liquidity providers in the commodity derivatives market. The EU countries shall implement the changes in their respective national law with effect from 28 February 2022.

Pending the upcoming regulatory changes, ESMA has expressed an expectation that national competent authorities will not prioritise their supervisory actions towards:

  • natural or legal persons holding positions in commodity derivatives, other than agricultural commodity derivatives (including seafood derivatives), with a net open interest below 300,000 lots
  • positions that are objectively measurable as resulting from transactions entered into to fulfil obligations to provide liquidity on a trading venue as referred to in point (c) of the fourth subparagraph of Article 2(4) of MiFID II

Finanstilsynet has taken note of ESMA’s statement and will not prioritise such supervisory actions.

Read ESMA’s statement:

CFTC Charges Former Fuel Oil Trader with Manipulating Fuel Oil Benchmark

Trader Admits to Manipulative and Illegal Conduct, Enters into a Cooperation Agreement

The Commodity Futures Trading Commission today issued an order filing and settling charges against Emilio José Heredia Collado of Lafayette, California for engaging in attempted manipulation and manipulation of a U.S. price-assessment benchmark relating to physical fuel oil products. Heredia engaged in this unlawful conduct for more than four years while employed as a fuel oil trader at a commodity trading firm and then at the U.S. affiliate of a multinational commodity trading company that acquired it. 

Heredia admits the facts of his manipulation and acknowledges that his conduct violated the Commodity Exchange Act (CEA) and CFTC regulations.

The order permanently bans Heredia from trading commodity interests and requires him to comply with undertakings never to engage in other commodity-interest related activities, including applying for registration and acting as a principal, agent, officer or employee of any person registered, required to be registered, or exempt from registration. The order also imposes a $100,000 civil monetary penalty.

“This enforcement action demonstrates that manipulation of energy prices will not be tolerated, and the CFTC will aggressively protect market participants who rely on the integrity of commodity benchmarks,” said Acting Director of Enforcement Vincent McGonagle. 

Separate Criminal Action

In a separate, parallel matter, the Department of Justice’s Fraud Section today announced a criminal charge against Heredia in the U.S. District Court for the Northern District of California. [See United States v. Heredia, Case No. 21-CR-0109 (N.D. Cal.)] Heredia pleaded guilty to one count of conspiracy to manipulate the price of a commodity in interstate commerce in violation of the CEA. 

Case Background

The order finds that from as early as June 2012 through at least August 2016, Heredia and others at the firms where he was employed sought to increase profits from their oil products trading by manipulating a U.S. price-assessment benchmark relating to physical fuel oil products in order to benefit the firms’ trading positions. Heredia also engaged in this conduct with the specific intent to manipulate the benchmark, and could and did create artificial prices.

The order recognizes Heredia’s entry into a formal cooperation agreement with the Division of Enforcement and his undertaking to continue to cooperate with the Division in connection with the subject matter of the order. 

The Division of Enforcement staff members responsible for this case are Gates S. Hurand, Peter Janowski, David W. MacGregor, R. Stephen Painter Jr., Michael Cazakoff, Matthew Edelstein, Patrick Marquardt, Jordon Grimm, Lenel Hickson Jr., and Manal M. Sultan.

FIA announces 2021 Futures Hall of Fame inductees

FIA today announced the induction of eight new members into the FIA Futures Hall of Fame. This year’s class joins 157 other honorees in the Hall of Fame, which was established in 2005 on FIA’s 50th anniversary. The new members will be honored at an awards ceremony during FIA’s annual flagship Boca International Futures Industry Conference.

Walt Lukken, president and CEO of FIA said: “We established the FIA Futures Hall of Fame to recognize the people who have made exceptional contributions to the growth and development of the futures, options and listed derivatives industry. This year’s inductees represent business leaders, advocates, policymakers, and visionaries who have provided the leadership and support necessary to keep growing our industry. FIA is honored to present them with this recognition.”

The following individuals were inducted into the Hall of Fame:

Brooksley  Born 

Bryan Durkin 

Gay Huey Evans 

Jeffrey  Geldermann   

Douglas Harris   

Jerome Kemp   

Charles Li   

Jim Newsome 

The Hall of Fame celebrates and recognizes the significant contributions individuals have made to the listed and cleared derivatives industry. Inductees are chosen by a panel of industry veterans and Hall of Fame members who consider nominees long-time experience and contributions to the industry over the course of their careers.

Learn more about the Futures Hall of Fame.

14th OPEC and non-OPEC Ministerial Meeting

The 14th Meeting of OPEC and non-OPEC Ministers took place via video conference on Thursday March 4, 2021, under the Chairmanship of HRH Prince Abdul Aziz bin Salman, Saudi Arabia’s Minister of Energy, and Co-Chair HE Alexander Novak, Deputy Prime Minister of the Russian Federation.

The Meeting welcomed the appointment of HE Mohammed Al-Fares, Minister of Petroleum of Kuwait and the return of HE Mohamed Arkab, Energy Minister of Algeria.

The Meeting emphasized the ongoing positive contributions of the Declaration of Cooperation (DoC) in supporting a rebalancing of the global oil market in line with the historic decisions taken at the 10th (Extraordinary) OPEC and non-OPEC Ministerial Meeting on 12 April 2020 to adjust downwards overall crude oil production and subsequent decisions.

The Ministers noted, with gratitude, the significant voluntary extra supply reduction made by Saudi Arabia, which took effect on 1 February for two months, which supported the stability of the market.

The Ministers also commended Saudi Arabia for the extension of the additional voluntary adjustments of 1 mb/d for the month of April 2021, exemplifying its leadership, and demonstrating its flexible and pre-emptive approach.

The Ministers approved a continuation of the production levels of March for the month of April, with the exception of Russia and Kazakhstan, which will be allowed to increase production by 130 and 20 thousand barrels per day respectively, due to continued seasonal consumption patterns.

The Meeting reviewed the monthly report prepared by the Joint Technical Committee (JTC), including the crude oil production data for the month of February.

It welcomed the positive performance of participating countries. Overall conformity with the original decision was 103 per cent, reinforcing the trend of aggregate high compliance by participating countries.

The Meeting noted that since the April 2020 meeting, OPEC and non-OPEC countries had withheld 2.3bn barrels of oil by end of January 2021, accelerating the oil market rebalancing.

The Meeting Extended special thanks to Nigeria for achieving full conformity in January 2021, and compensating its entire overproduced volumes.

The ministers thanked HE Timipre Sylva, Minister of State for Petroleum Resources of Nigeria, for his shuttle diplomacy as Special Envoy of the JMMC to Congo, Equatorial Guinea, Gabon and South Sudan to discuss matters pertaining to conformity levels with the voluntary production adjustments and compensation of over-produced volumes.

In this regards the Ministers agreed to the request by several countries, which have not yet completed their compensation, for an extension of the compensation period until end of July 2021.

It urged all participants to achieve full conformity and make up for pervious compensation shortfalls, to reach the objective of market rebalancing and avoid undue delay in the process.

The Meeting observed that in December, stocks in OECD countries had fallen for the fifth consecutive month.

The Meeting recognized the recent improvement in the market sentiment by the acceptance and the rollout of vaccine programs and additional stimulus packages in key economies, but cautioned all participating countries to remain vigilant and flexible given the uncertain market conditions, and to remain on the course which had been voluntarily decided and which had hitherto reaped rewards.

The Ministers thanked the JTC and the OPEC Secretariat for their contributions to the meeting. The next meetings of the JMMC and OPEC and non-OPEC Ministers are scheduled for 31 March and 1 April 2021, respectively.

Copper Price Hits 9-year Highs

Copper price hits 9-year highs amid strong demand for manufactured goods and China’s strong economic rebound after the coronavirus health crisis. The first-month futures contracts in COMEX is trading at $3.9635 having early today as high as $3.9750, a price that we haven’t seen since February 2012. Copper hit $4.65 per pound, the all-time high, back in February 2011.

In London Metal Exchange the three-month copper futures trading today at 8632 per tonne.

Copper price ended in 2020 with over 22% gains, while now Copper is on track for it’s 11th straight monthly gains, while is 8.8% higher since the start of the year. The gains since the March 2020 lows are now up to 98%. Many analysts believe that the rally is just the start of a super-cycle in metals as the demand for the base metals from renewable energy projects is growing.

The main factors that drive the recent rally are the weak U.S. dollar the rising inflation expectations in the USA and below-average stock levels. Excess demand from China and South Korea also boosts the copper price.

Goldman Raised the Copper Price Target

Goldman Sachs has raised the copper target price in the next 12-months to $10.500 per metric ton as the big deficit on copper scarcity expects to rise amid increased demand. Goldman also set the 3-month price target at $9.200 per metric ton and the 9-month target at $9.800.

Goldman expects that copper price will average at $8,625 in 2021, and an average of $9,175 in 2022.

Copper Technical Analysis

The Copper price is 1.60% higher at 3.9630 having hit the daily high which is also an all-time high at 3.9750. The trend is clearly bullish for the industrial metal and higher levels are on the cards. A warning signal for bulls is that the copper price has reached an overbought level as the RSI 14 hovers today above the 78 mark, while on the weekly chart the RSI is at 76.87 just below the all-time high that the RSI reached back in December 2020.

First miner resistance for the copper stands at 3.9895 the high from February 6, 2012. More selling pressure would emerge at 4.0245 the top from September 11, 2011. The most critical point is the top from August 29, 2011, at 4.2055 which if breached might push the price up to all-time highs.

On the other hand, support for copper price would be met at 3.8855 the daily low. A close below might test 3.7940 the low from yesterday trading session. A close below 3.7210 might cancel the recent rally and might push the price towards 3.6240 the 50-day moving average.

Update of position limits for certain commodity derivative contracts

The Financial Conduct Authority (FCA) has today published updated position limits for certain commodity derivative contracts traded on ICE Futures Europe. The limits have been established under the Markets in Financial Instruments Regulations 2017 (MIFI Regs). 

The limits are being revised in accordance with RTS 21, which states that position limits should be reviewed when there is a significant change in Open Interest, deliverable supply, or any other significant change in the market. 

The changes reflect changing market conditions. In these cases, the continued use of a 2,500 lot limit could impair market functioning or growth in ways which MiFID II seeks to avoid, and a limit will be announced in due course when market changes have stabilised.

Where limits are To Be Announced “TBA”, we will give two months’ notice before any revised limits come into force to enable market participants to adjust their trading strategies in a responsible way.

The temporary suspension of limits (TFU and UKD) will apply immediately. WIM is a new contract being launched on 7 December, so there is no previous limit.

These limits may change in the event that we decide it is necessary. 

The following table sets out the affected contracts and the revised limits:

ContractVenue Market Identifier CodeProduct codePrevious Spot Month limitPrevious Other Months’ limitRevised Spot Month limitRevised Other Months’ limit
Dutch TTF Gas 1st Line Financial Futures (USD/MMBTU)IFEUTFU2,500 lots2,500 lotsTBATBA
UK NBP Gas 1st Line Financial Futures (USD/MMBTU)IFEUUKD2,500 lots2,500 lotsTBATBA
WIM LNG (Platts) FutureIFEUWIMTBATBA

Full details of the commodity derivative contracts and the limits set on positions in them can be found at https://www.fca.org.uk/markets/mifid-ii/commodity-derivatives/position-limits.