Editorial comment ///

The Wall Street Journal ran an article in early July that touched off a firestorm of contention, especially among folks that would normally treat anything in the WSJ as gospel. The article was a simple analysis of the change in the number of futures market speculators versus non-speculators. The conclusion was that in 2000, 37% of traders were speculators, and 63% were non-speculators (physical commodity hedgers). By 2008, speculators comprised 71% of the market. They used the US’s CFTC data, but with a reclassification of the number of swaps traders, as per a congressional subcommittee. The CFTC-the commodities watchdog-said that this probably wasn’t correct, but that they were still working on the measurement problem and might make some changes. At issue is the definition of speculators (defined as Non-commercial by the CFTC) versus non-speculators (defined as Commercial). Almost all Index Speculators now use a vehicle called “swaps,” which allows a speculator to bypass CFTC’s position size limits.

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