Cocoa Whipsawed as NYSE Liffe Changes Data on Speculative Trades

Cocoa prices whipsawed this week after NYSE Liffe, the London unit of the world’s largest stock exchange operator, amended data on traders’ speculative positions and posted a notice about the change on its website a day later.

Futures rose the most in almost a month Jan. 7 as the bourse said speculators cut bets on higher prices by 31 percent in the week ended Dec. 31. Cocoa retreated by about the same amount the following day when some traders noticed NYSE Liffe had changed its data for the week ended Dec. 24, which meant the drop in speculative positions was now 12 percent. A statement about the change was issued on the exchange’s website yesterday.

“When we have data that is so closely scrutinized, the market has to be assured that what is published is correct,” said Justin Grandison, head of cocoa brokerage at ABN Amro Markets (U.K.) Ltd. “The failure of the exchange to notify all members at once may have given some traders an advantage.”

NYSE Liffe started publishing the data in October 2011, after a group of 16 cocoa consumers said in a joint letter to the bourse in 2010 that it would improve transparency. Some traders might favor ICE Futures U.S. instead, where the data were already being reported by the U.S. Commodity Futures Trading Commission, they said.

“The Commitment of Traders report for close of business Dec. 24, 2012 for cocoa has been recalculated and republished,” NYSE Liffe said in its notice. “This was due to a technical issue that occurred during the calculation of the original figures. The exchange apologizes for any inconvenience caused.”

Long Position

Cocoa closed up 1.3 percent at 1,441 pounds a metric ton on Jan. 7 and retreated 1.4 percent to 1,421 pounds the following day. The initial report on the decline in the so-called net-long position spurred the rally and the revision to the data had the opposite effect, London-based Grandison said. Adaora Anunoby, a spokeswoman for NYSE Liffe in London, declined to comment.

“If you didn’t realize that the data had been revised, you were at a disadvantage,” said Jonathan Parkman, the co-head of agriculture at Marex Spectron Group in London. “They could have handled the issue better as there is no doubt in my mind that people have traded in a different way than they would have done if the data had been correct.”

The London cocoa futures market is valued at 3.24 billion pounds ($5.2 billion) based on contracts outstanding, data compiled by Bloomberg show.

“We had a short position in the market and our model got stopped and the short was initiated again” on Jan. 8, said Nick Gentile, the vice president of Atlantic Capital Advisors LLC in Jersey City, New Jersey. “We probably wouldn’t have gotten stopped out of the position if the data was correct.”

IntercontinentalExchange Inc., the 12-year-old energy and commodity futures bourse, agreed to buy NYSE Euronext, NYSE Liffe’s parent company, for $8.2 billion in cash and stock last month. NYSE Euronext owns the New York Stock Exchange, stock markets in Paris, Brussels, Lisbon, Amsterdam and Europe’s second-largest derivatives bourse.

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