1A] PRIMER on CME ClearPort & Volume Indicator
ClearPort is a clearing service offered by CME that allows over-the-counter (OTC) trades to take place off-exchange.
CP trade categories include
1) Exchange for physical
2) Block Trades
3) Exchange for risk
4) Exchange for swap
ClearPort is a clearing service offered by CME that allows over-the-counter (OTC) trades to take place off-exchange.
CP trade categories include
1) Exchange for physical
2) Block Trades
3) Exchange for risk
4) Exchange for swap
1B] Of those, Exchange-for-physical (EFP) and block-trades constitute the majority of ClearPort (CP) transactions. EFR contribute a small component while EFS are rarely traded in the case of gold GC futures. 
1C] Exchange for Physical is the simultaneous execution of a GC futures contract and a corresponding physical transaction such as a forward contract on a physical transaction, ETF, etc.
1D] These OTC transactions that are cleared through the CME ClearPort system constitute 1%-6% (avg: 2.6%) of the total GC gold futures volume that is traded daily. The vast majority of total trading volume is transacted through the on-exchange trading platform called Globex.
2A] ClearPort Volume Indicator
Although trade volumes on the ClearPort system may be low compared to Globex, it is worth monitoring since spikes in volume tend to PRECEED drops in the price. For example, on Jan 4, ClearPort volume increased 400% compared to prior 5d avg.
Although trade volumes on the ClearPort system may be low compared to Globex, it is worth monitoring since spikes in volume tend to PRECEED drops in the price. For example, on Jan 4, ClearPort volume increased 400% compared to prior 5d avg.
2B] This was the first warning sign. The volume remained elevated Jan 5, 6, 7, 8. What happened to the gold price? On Jan 6, gold went down -2% and Jan 8, -4.5% from open to low. One can look to other historical examples of ClearPort volume being a good leading indicator.
2C] How to interpret the ClearPort Volume indicator?
1) when ClearPort volume's 5d moving avg starts to rise, prepare for a buying opportunity to occur within 0 to +3 trading days of the ClearPort Volume reaching its local peak.
1) when ClearPort volume's 5d moving avg starts to rise, prepare for a buying opportunity to occur within 0 to +3 trading days of the ClearPort Volume reaching its local peak.
2D]
Empirically, 86% of the local lows in the gold price occur within 0 to 3 trading days of the peak in ClearPort volume 5d moving-average.
Empirically, 86% of the local lows in the gold price occur within 0 to 3 trading days of the peak in ClearPort volume 5d moving-average.
2E] How to interpret the ClearPort Volume indicator? (cont)
2) when a down-move in gold is underway, the indicator can be used to put boundaries on when it has likely concluded and the bottom is in.
2) when a down-move in gold is underway, the indicator can be used to put boundaries on when it has likely concluded and the bottom is in.
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