Order Flows and Financial Investor Impacts in Commodity Futures Markets

We investigate the impacts of financial investors in commodity markets using intraday trade-and- quote data for commodity futures. We find strong evidence of order flows and price impacts in agricultural futures markets associated with changes in the positions of index traders reported by the CFTC. These order flows and price impacts are consistent with the magnitudes of the index flows, and are concentrated in the minutes just prior to daily futures settlement, when the price impact of order flow is generally lowest. While we confirm the positive returns around the issuance of commodity-linked notes documented by Henderson, Pearson, and Wang (2015), we find that these notes are an order of magnitude too small for the price impacts of hedging trades to explain these returns. We provide evidence that the positive returns are more consistent with CLN issuance responding to commodity prices rather than vice-versa.