high frequency trading, equity, efficiency and the release ...•high frequency traders and systems...
TRANSCRIPT
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Seth Meyer, ChairmanWorld Agricultural Supply and Demand Estimates (WASDE)
Interagency Commodity Estimates Committee World Agricultural Outlook Board, Chairing Agency
High Frequency Trading,
Equity, Efficiency and
the Release of Information
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WAOB - World Agricultural Outlook Board WASDE - World Agricultural Supply and Demand Estimates Report
Interagency Commodity Estimates Committees (ICEC):
• Wheat
• Rice
• Oilseeds (incl. Soybeans)
• Grains (Maize, Sorghum, Barley, Oats)
• Cotton
• Sugar
• Beef, Pork Poultry
• Dairy
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Interagency Commodity Estimates Committee (ICEC)WASDE Process
Ukraine Corn
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WASDE and Crop Production and are market movers
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Some of the US Government’s Principal Federal Economic Indicators (PFEIs), some with ‘lockup’
•World Agricultural Supply and Demand Estimates (WASDE) + Crop Production-USDA
•Crop Production - USDA
•Housing Starts - Dept. of Commerce
•Gross Domestic Product - Dept. of Commerce
• Employment – Dept. of Labor
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Are High Frequency Traders a Positive or Negative?• They just ‘are’. USDA is agnostic with respect to
their presence.
• They are not going anywhere so we have adjusted.
• They are ‘fundamental’ traders, it may be ‘simplistic’ and ‘lack nuance’ (?) but rely on some reduced form representation of market response to released information.
• Evidence suggests they don’t ‘solve’ the market completely or at least not in the short run.
are
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There is No Going Back
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Peak Movements by Commodity
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Changes in Lockup Over TimeMotivations not independent
• Changes in release times • After Market Close• Before Market Open• Noon (11am Chicago)
• Changes in Market Status• Market Closed/Market Open when released• No longer a choice
• Press in ‘Lockup’
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Big Movement Days by Year
Source: CFTC Sharp Price Movements in Commodity Futures Markets
Daytime Trading Hours Overnight Trading HoursTop Price Movement Days
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Why noon in Washington D.C.?
Chicago, Illinois
London, UK
Dalian, China
8am Eastern 12 noon Eastern 3pm Eastern
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Press In Lockup (ended July 2018)
• Pressroom with dedicated machines on an internal network (no outside communications).
• Access available for no charge to credentialed press operations.
• Would receive Crop Production and WASDE 90 minutes before release.
• Would load stories and ??? into their own system queue.
• Single physical switch isolated USDA and Press, thrown at 12:00 noon.
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Comparison of Data flow PathsUSDA (purple) vs Press (yellow)
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Closer
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Closer…….Closer
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Closer…….Closer……there it is.
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Associated Press Website
October 2018 July 2018, since deleted
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File TransmissionPress
Distance
~1 mile
Press File Size
0 or 1
USDA File Distance
~1000 miles
USDA File Size
40 pages1-2 mb
depending on file type
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August 10 data compared to previous releases
• August 10
• 3,570,640 Hits
• 339.2 GB
• July 12
• 1,649,917 Hits
• 211.7 GB
• June 12
• 485,084 Hits
• 68.3 GB
The August 10 release saw a 636%
increase in requests from June
0
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0.0
1.0
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4.0
1-Jun 1-Jul 1-Aug
Hits GB
Million Hits GB Downloaded
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From 8am - 8pm Eastern3,570,640 Hits on WASDE site
● Peaking at 11:55am● 77.8% of Hits were offloaded to distributed network system
339.2GB of bandwidth● 99% of bandwidth was offloaded to distributed network system
Summary of August 10th, 2018
View of Traffic from 8am - 8pm Eastern on August 10
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Pre-Report Trade Range for Global Grain Carryout Stocks for 2018/19
Reuters
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China Corn Production RevisionsNovember WASDE
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Mill
ion
Met
ric
Ton
s
November WASDE October WASDE
Cumulative Change = 297 mmtBased on Third National Agricultural Census
Source: China National Bureau of Statistics and USDA.
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0%
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120%
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19
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Sto
cks/
Use
Sto
cks,
Mill
ion
Met
ric
Ton
s
November WASDE October WASDE Stocks/Use
China Corn Stock Changes
Cumulative Change = 149 mmt
Source: USDA.
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Pre-Report Trade Range for Global Grain Carryout Stocks for 2018/19
Most of the ‘Surprise’ related to China Stocks
100
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Wheat Corn Soy
MMT
Wheat
Corn
Soy
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December US Corn FuturesNovember 8 WASDE Release
Major WASDE ChangesCorn 2018/19
Ukraine Corn Production+2.5 mmt to 33.5 mmt
US Corn Yield-0.11 mt/ht to 11.23 mt/ht
US Corn Production -3.9 mmt to 371.5 mmt
US Carryout -2.0 mmt to 44.1 mmt
US Price Forecast+$3.94 to $141.73 mt
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Conclusions
• We (USDA) are agnostic as to the participation of high frequency traders
• High Frequency Traders and systems are not going anywhere
• We also cannot go back to a trading ‘halt’
• USDA and other data release organizations have to adapt and prepare
• Our objective is to provide a level playing field, speed will still ‘win’
• The report continues to have considerable market effect, indicating a contribution to market information