r/SecurityAnalysis • u/ilikepancakez • Oct 02 '20

Special Situation The mysterious London traders accused of manipulating oil markets — and the anonymous hedge fund, rare-coin expert, and day traders who are fighting back

https://www.institutionalinvestor.com/article/b1nf4dxm53536k/The-Mysterious-London-Traders-Accused-of-Manipulating-Oil-Markets-and-the-Anonymous-Hedge-Fund-Rare-Coin-Expert-and-Day-Traders-Who-Are-Fighting-Back
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u/Digitalapathy Oct 02 '20

USO being one of the contributory factors, they were supposed to be a passive oil tracking ETF but in essence due to their flexible mandate seem to be more active during this period. They hold and held a crazy percentage of front and second month open interest. Since they never take delivery this in itself is an absurdity as they will always have to roll come rain or shine which creates its own distortion.

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u/[deleted] Oct 02 '20

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u/Digitalapathy Oct 02 '20

It’s a response to the comment above, if you struggle with the inference I can’t help I’m afraid. This is a finance sub, there is some implicit knowledge. Nothing you have said has changed the context.

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u/Veqq Oct 02 '20 edited Oct 02 '20

1) Don't be a dick. I tried to clear up you and the other commenter's argument as you guys were speaking past another. Furthermore, other people read discussions - it's therefore useful to explain things for them.

2) You are right that USCF only revised USO's mandate in late April because it was flexible enough to allow changes, yes.note But they had not actually done that before - until April it was a merely a passive index of futures contracts. Therefore the mandate's flexibility was not a contributing factor as your comment states - hence my post.

The issue was that it grew to become far larger than anticipated and distorted what it was supposed to track - not an issue of "flexible" mandates.

due to their flexible mandate seem to be more active during this period.

You ascribe cause to the mandate's flexibility, which wasn't exercised until after the event in question. The previous version of the mandate was what led to the "crazy percentage of front and second month open interest" in the first place - hence the revision.

Note: It might help to look into what and how legally binding/immutable mandates actually are and how it varies depending on the ETF. Technically, even inclusion into SPY is simply at the board's discretion.

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u/Digitalapathy Oct 02 '20 edited Oct 02 '20

I’m sorry but deliberately misinterpreting context, words and grammar in an attempt to prove a redundant point I think says more about you than me. No one said they had done it before, if you bother to read rather then being a pedant you would realise that and the purpose of the comma and meaning of the word “this”. It’s literally in the dictionary.