CFTC Staff Issues Research Report on Impact of Automated Orders in Commodity Futures Markets
On March 27, the Commodity Futures Trading Commission’s Market Intelligence Branch in the Division of Market Oversight (DMO) issued a report analyzing the entering of manual and automatic orders in commodity futures markets in the United States to determine how technological change is affecting futures trading. DMO staff used internal CFTC transactional data for 30 futures contracts during the period January 2013 – December 2018, and examined what effect the order placement mechanism had on the respective transaction.
The research produced the following findings:
the percentage of automated orders has increased in all futures markets;
automated orders are smaller in size than manual orders and their resting times are shorter than the resting times of manual orders;
automated orders are typically limit orders; and
while automation of orders increased steadily each year, historical volatility of end-of-day prices did not exhibit the same trend.