March 27, 2019

CFTC Staff Issues Research Report on Impact of Automated Orders in Futures Markets

Washington, DC — The Commodity Futures Trading Commission’s (CFTC) Market Intelligence Branch in the Division of Market Oversight (DMO) issued a report today that analyzed the entering of orders manually and automatically 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 effects, if any, the manual and automated order placement mechanisms had on these markets.

The research produced the following findings:

1. The percentage of automatically placed orders has increased for all commodity futures markets;
2. Automated orders are smaller in size than manual orders and their resting times are shorter than the resting times of orders placed manually; 
3. Automated orders are almost always limit orders; and
4. Although the level of automation increased steadily each year, historical volatility of end-of-day prices did not exhibit the same trend.

MIB’s role is to analyze and communicate current and emerging market issues to CFTC leadership and the public and assist the CFTC in making informed policy. MIB periodically publishes reports of its findings at CFTC Staff Reports.