Trading and Information in Futures Markets

57 Pages Posted: 12 May 2015 Last revised: 24 Jul 2019

See all articles by Guillermo Llorente

Guillermo Llorente

Universidad Autonoma de Madrid

Jiang Wang

Massachusetts Institute of Technology (MIT) - Sloan School of Management; China Academy of Financial Research (CAFR); National Bureau of Economic Research (NBER)

Date Written: July 5, 2019


This paper studies the trading behavior of different types of traders in commodity futures and their impact on liquidity consumption/provision as well as price discovery in the market. CME classifies each trade by its Customer Type Indicator (CTI) into four groups: a local trader who trades for his own account (CTI1), a commercial clearing member for his proprietary accounts (CTI2), an exchange member for his own account though a local trader (CTI3), and the general public (non-members) (CTI4). We find that non-members (CTI4) consume most of the short-term (intraday) liquidity while local traders as market makers are its main provider. Such a liquidity provision yields a substantial Sharpe ratio for the latter and constitutes most of the intraday volume. Most of the interday trading and position taking come from groups CTI2 and CTI3, reflecting their longer term needs for hedging and speculation. We also find that the imbalance in demand and supply in the market can explain a significant part of the daily price movements. In addition, changes in the overnight positions of the general public and clearing members contribute mostly to daily price changes. Moreover, we find that daily changes in the positions of CTI3 group can forecast future price movements, reflecting possible information advantage they may possess.

Keywords: futures markets, CTI, liquidity, price discovery

JEL Classification: G10, G12, G13, G14, G18

Suggested Citation

Llorente-Alvarez, Jesus-Guillermo and Wang, Jiang, Trading and Information in Futures Markets (July 5, 2019). Available at SSRN: or

Jesus-Guillermo Llorente-Alvarez (Contact Author)

Universidad Autonoma de Madrid ( email )

Facultad de C. Economicas
Madrid, Madrid 28049
34-91-497-4812 (Phone)
34-91-497-7057 (Fax)

Jiang Wang

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
Cambridge, MA 02142
United States
617-253-2632 (Phone)
617-258-6855 (Fax)

China Academy of Financial Research (CAFR)

1954 Huashan Road
Shanghai P.R.China, 200030

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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