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Market

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The Retail Influence

The Global Markets Advisory Committee

The Market Intelligence Branch (“MIB”)

The Division of Market Oversight (“DMO”)

March 2021
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Disclaimer

The views expressed represent those of staff in MIB and do not 

necessarily reflect the views of the Commodity Futures Trading 

Commission, any of the Commissioners, the Division of Market 

Oversight, or other staff at the Commission.

Consistent with Section 8(a) of the CEA, this presentation does not 

contain data or information that would separately disclose the 

business transactions or market positions of any person, any trade 

secrets or names of customers.
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MIB Mission

The Branch’s mission is to monitor the health, performance, and 

structure of U.S. futures, options, and swaps markets (“derivatives 

markets”), highlighting and responding to emerging trends, threats, 

structural and systemic risks. 
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Purpose

MIB has an ongoing research project that analyzes the retail 

influence on the microstructure of the derivatives markets.

▪ This interim report is from the research work undertaken thus far. The 

Branch's work is continuing.

▪ For this study's purpose, "Retail" is defined as a market participant 

who executes less than or equal to 50 contracts a day.
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Introduction

Futures and options volume in the U.S. has doubled since 2007.

▪ Historically, as volatility increased, markets became risk-averse and 

led to lower volumes. However, in the past ten years, volatility and 

volumes have risen in tandem.

0

10

20

30

40

50

60

 -

 100

 200

 300

 400

 500

 600

 700

 800

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Jul-11

Jan-12

Jul-12

Jan-13

Jul-13

Jan-14

Jul-14

Jan-15

Jul-15

Jan-16

Jul-16

Jan-17

Jul-17

Jan-18

Jul-18

Jan-19

Jul-19

Jan-20

Jul-20

Jan-21

Millions

 Futures Options VIX Source: CFTC

Daily Transaction Volume & VIX Volatility

All U.S. Futures & Options Markets
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0

10

20

30

40

50

60

70

80

90

Jan-16 Jul-16 Feb-17 Aug-17 Mar-18 Sep-18 Apr-19 Nov-19 May-20 Dec-20

Thousands

Introduction

Fueled by retail interest, the number of first-time traders reached 

the highest levels during the early pandemic months.

▪ Increased order flow through retail FCMs, introducing brokers 

(offering online account opening, reduced fees, and minimum balance 

requirements), as well as the growth of smaller retail-friendly 

contracts at existing and new DCMs contributed to this growth.

New Accounts Opened

All U.S. Designated Contract Markets

Source: CFTC
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0

50

100

150

200

250

300

Jan-16

Mar-16

May...

Jul-16

Sep-16

Nov-16

Jan-17

Mar-17

May...

Jul-17

Sep-17

Nov-17

Jan-18

Mar-18

May...

Jul-18

Sep-18

Nov-18

Jan-19

Mar-19

May...

Jul-19

Sep-19

Nov-19

Jan-20

Mar-20

May...

Jul-20

Sep-20

Nov-20

Jan-21

Thousands

Evolution

Over 750,000 new participants entered the markets since January 2020, 

and approximately half those accounts traded more than once.

▪ Allowing for some new account setups to duplicate account 

references, the growth of over 375,000 accounts is significant.

▪ The monthly participation rates since 2016 (the number of participants 

engaged in trading each month) only doubled as most retail accounts 

sought specific trading opportunities.

Number of Market Participants by Month

All U.S. Designated Contract Markets

Source: CFTC
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0%

50%

100%

150%

200%

250%

300%

Silver

WTI Crude

Corn

Soybeans

Nat Gas

Peso

Platinum

VIX

UST 30-Years

Lean Hogs

Yen

Gold

Eurodollars

Live Cattl

Wheat- HRW

Wheat - SRW

Coffie

UST 10-Yr

S&P eMini

Nasdaq

UST 5-Yr

Sterling

Fed Funds

Cocoa

Euro

Copper

UST 2-Yr

Cotton

Sugar

UST Ultra

Soy Oil

Soy Meal

Gasoline

Heating Oil

Source: CFTC

Peak Retail Participation vs. Average

Between January 2020 – February 2021 Activity by Contract

Activity

The most significant retail engagement in futures markets occurred in 

Silver (February 2021) and in WTI Crude Oil (April 2020). 

▪ Engagement is in short time windows (day-trading to a few days), 

typically in volatile market conditions. Feb 1, 2021 Apr 20, 2020 June 30, 2020

Feb 27, 2020

Mar 12, 2020

Jan 08, 2020

Feb 28, 2020

Feb 07, 2020

Sep 10, 2020Feb 22, 2021

Feb 28, 2020Feb 04, 2021

Jan 04, 2021

Mar 09, 2020

Jan 04, 2021

Mar 18, 2020

Sep 30, 2020

Feb 18, 2020

Feb 22, 2021

Feb 28, 2020

Feb 27, 2020Feb 25, 2020

Mar 03, 2020

Sep 08, 2020

Mar 09, 2020

Mar 06, 2020

Jan 31, 2020

Feb 28, 2020

Aug 11, 2020

Mar 02, 2020

Jan 12, 2021

Aug 03, 2020

Mar 02, 2020

Feb 16, 2021
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0

10

20

30

40

50

60

70

80

90

100

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2-Jan-20

2-Feb-20

2-Mar-20

2-Apr-20

2-May-20

2-Jun-20

2-Jul-20

2-Aug-20

2-Sep-20

2-Oct-20

2-Nov-20

2-Dec-20

2-Jan-21

2-Feb-21

Retail Day Google Trends

50

55

60

65

70

75

80

85

90

95

100

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2-Jan-20

2-Feb-20

2-Mar-20

2-Apr-20

2-May-20

2-Jun-20

2-Jul-20

2-Aug-20

2-Sep-20

2-Oct-20

2-Nov-20

2-Dec-20

2-Jan-21

2-Feb-21

Outright Day Trader Google Trends

Social Media

In Silver and Crude Oil (WTI) contracts, the direct retail and day trading 

in futures aligns well with social media interest.

▪ Google Trends website analyzes the popularity of top search queries 

in Google Search. Both February 1, 2021 (Silver) and April 20, 2020 

(WTI) recorded scores of 100. In addition, there was over three times 

the normal activity seen in futures markets by retail accounts.

Retail Activity in Crude Oil WTI

Position & Day-Traders

Retail Activity in Silver

Position & Day-Traders

Position Day Trader Position Day Trader
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0

10

20

30

40

50

60

70

Jan-20

Feb-20

Mar-20

Apr-20

May-20

Jun-20

Jul-20

Aug-20

Sep-20

Oct-20

Nov-20

Dec-20

Jan-21

Feb-21

Thousands

0

2

4

6

8

10

12

14

16

Jan-20

Feb-20

Mar-20

Apr-20

May-20

Jun-20

Jul-20

Aug-20

Sep-20

Oct-20

Nov-20

Dec-20

Jan-21

Feb-21

Thousands

Source: CFTC Source: CFTC

Crude Oil WTI

ETF/ETN Linked Futures

Silver

ETF/ETN Linked Futures

Market Interconnectivity

ETFs that cater to retail clients may influence futures markets directly, 

indirectly and tangentially.

▪ Commodity ETFs participate directly or via swaps. Physical ETFs 

(such as Silver) tangentially track to futures markets. In both these 

markets, the futures contract is considered the benchmark and is the 

primary price discovery market.
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Commodities

Generally, the physical commodity markets are significantly more 

extensive than small-cap equities. Also, futures have long and short 

interest that works differently when compared to short-selling securities.

▪ Unlike in securities, futures have an “active” contract that expires, 

technically driving non-commercial participants to exit (retail traders 

are unlikely to take or make delivery).

▪ Annual global production, according to Barchart, in Copper and Gold 

is approximately is $180 billion, Silver is $21 billion, Wheat is $183 

billion, Corn is $245 billion and Soybeans about $178 billion.

▪ BP’s worldwide production estimates in Crude Oil is $2.2 

trillion/year. Natural Gas is approximately $440 billion/year.

▪ According to the U.S. Treasury Department, the U.S. debt outstanding 

on Oct. 1, 2020, surpassed $27 trillion.
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-40

-30

-20

-10

0

10

20

4/15/20 18:004/15/20 23:00

4/16/20 4:004/16/20 9:00

4/16/20 14:004/16/20 20:00

4/17/20 1:004/17/20 6:00

4/17/20 11:004/17/20 16:004/19/20 22:00

4/20/20 3:004/20/20 8:00

4/20/20 13:004/20/20 19:00

4/21/20 0:304/21/20 5:45

4/21/20 10:45

Liquidity

In both Silver and WTI, liquidity (bid-offer, order book depth) was 

reasonable in the build-up, but fell off during the exit. 

▪ Unlike securities, “active” commodity derivatives are deliverable at 

expiry which ensures that non-commercial participants exit or roll.

▪ Retail appeared late for Silver, missing most of the move. In both WTI 

and Silver, retail left late, losing out in the unwind. 

25

26

27

28

29

30

1/29/21 0:001/29/21 6:00

1/29/21 11:451/31/21 18:45

2/1/21 0:302/1/21 6:15

2/1/21 12:002/1/21 18:45

2/2/21 0:452/2/21 6:30

2/2/21 12:152/2/21 19:00

2/3/21 1:002/3/21 7:00

2/3/21 12:452/3/21 20:00

2/4/21 2:452/4/21 8:30

Crude Oil WTI

CLK0 – May Contract

Silver

SIH1 – Mar Contract

Open 

Asia 1/31

Close 

Friday 1/29

2:08 pm

2:30 pm

Pre-open

4:00 am

Source: CFTC Source: CFTC
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Performance

Overall, retail accounts between January, 2020 and February, 2021 have 

had significant negative returns.

▪ All retail participants transactions (outright, spread implied and TAS) 

including end-of-day positions have been included in the analysis.

▪ The retail performance is narrowly on the futures markets and 

excludes other investments that may offset these losses.

Performance and Participation of Retail Accounts

Sector Representation of 40 Futures Markets

Source: CFTC

Performance

Participation

Low Medium Highest

Negative Neutral Positive

Treasury 

Futures

Agriculture

Futures

Currency

Futures

Energy

Futures

Equity Index

Futures

Metals

Futures

Livestock

Futures

Soft Commodity

Futures
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Summary

There is a visible growth of retail interest fueled by easier market access 

(directly and indirectly), social media hype, smaller and retail-friendly 

contracts, and exchanges. The potential commodity supercycle may 

further incentivize participation.

▪ Although the number of participants has grown exponentially, the 

direct trade volumes are approximately 10-15% of total activity. 

Asset/Money managers offering retail products (i.e., ETFs, ETNs) 

increase direct, indirect (via swaps), and tangential (cross-market 

arbitrage) impact.

▪ Physical commodity markets are much larger than small-cap equities. 

The futures markets have long and short interest that are dissimilar to 

equities but they are not immune to short-selling type impacts.

▪ Retail activity adds to liquidity as almost all transactions are placed as 

resting or limit orders. Retail participation is also positive for liquidity 

diversification as retail trading strategies differ from those of the 

professional traders.
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Conclusions

The retail participants' growth (both directly or indirectly) adds liquidity 

and diversification to derivatives markets. However, if this sector is to 

develop fully, a more even return profile is needed to emerge.

Specifically, two areas where more work may be necessary:

▪ Investor protections, disclosure requirements, suitability standards, 

and establishing clear obligations that protect investor interests by all 

introducing brokers and/or FCMs.

▪ Evaluate required market structure development and policy 

considerations such as the predatory type strategies that leverage or 

target broad retail engagement.
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MIB

The staff involved and contributing to this effort include:

Mel Gunewardena – The Chief Market Intelligence Officer

Geoffrey Price – Associate Director, MIB

Eugene Kunda, PhD – Market Analyst, MIB

Jonathan Dye – Market Analyst, MIB

Jay Huhman – Market Analyst, MIB

Michael Nouri – Market Analyst, MIB

Robert Fedinets – Market Analyst, MIB

Wilburn Carlile – Market Analyst, MIB
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Reference

https://www.wsj.com/articles/everyones-a-day-trader-now-11595649609

https://www.barchart.com/cmdty/resources/crb-yearbook

https://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html