Exploring Commodity Trading Activity: An Integrated Analysis of Swaps and Futures

This paper provides the first public analysis of a cross-section of physical commodity swap markets using proprietary position data collected by the Commodity Futures Trading Commission. We find that futures markets are generally larger than swaps markets, as measured by open interest, with WTI crude oil being an exception. By merging data on futures, swaps, and index swaps, we gauge exposures for various types of market participants, products, and tenors across the entire US WTI derivatives market for the first time. We find that, in aggregate, market participants appear to use futures and swaps in tandem – Financial End-Users and Commercial End-Users both have net positions in swaps in the same direction as their net positions in futures. Swap dealers appear to have offsetting swaps and futures net positions. To illustrate the joint nature of these markets, we contrast Working’s T index computed from both futures and swaps data with the index computed solely from futures or swaps. We find that the combined index differs substantially from the index computed using either the futures or swaps data alone, highlighting the potentially incomplete nature of any analysis done using only futures or swaps market data.