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Commodity Trading Part 2

About trading commodity markets

Trading Oil

Building on the infrastructure and credit and settlement networks established for food and precious metals, many such markets have proliferated drastically in the late 20th century. Oil was the first form of energy so widely traded, and the fluctuations in the oil markets are of particular political interest.

Some commodity market speculation is directly related to the stability of certain states, e.g. during the Gulf War, speculation on the survival of the regime of Saddam Hussein in Iraq. Similar political stability concerns have from time to time driven the oil price. Some argue that this is not so much a commodity market but more of an assassination market speculating on the survival (or not) of Saddam or other leaders whose personal decisions may cause oil supply to fluctuate by military action.

The oil market is, however, an exception. Most markets are not so tied to the politics of volatile regions - even natural gas tends to be more stable, as it is not traded across oceans by tanker as extensively.

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Commodity Futures Trading Commission

The Commodity Futures Trading Commission (CFTC) is an independent agency of the United States Government, created by Congress in 1974. It replaced the Commodity Exchange Authority. It is responsible for recording and monitoring the trading of futures contracts on United States futures exchanges. The CFTC has the authority to fine, suspend, or sue the company or individual in a federal court in cases of misconduct, fraud, or if a rulebreaking occurs.

The CFTC publishes weekly reports containing details of holdings for market-segments, which have 20 or more reportable participants. The reports are released every Friday (including data from the previous Tuesday) and contain data on open interest split by reportable and non-reportable open interest as well as commercial and non-commercial open interest. This type of report is referred to as 'Commitments-Of-Traders'-Report, COT-Report or simply COTR.

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The article above only touches the surface of Commodity trading, for further information Wikipedia is great place to do a search.

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