Abstract
This whitepaper Unraveling the Myth of Front-Running CTAs: A Deep Dive into Market Realities investigates the assumption that Commodity Trading Advisors (CTAs) follow predictable patterns that can be exploited by “front-running strategies”, more accurately referred to as “anticipatory trading strategies”. We note a prevalence of market news and sell-side research recommending these anticipatory trading strategies that do not require high frequency trading (HFT) to generate profits, but rather are based on the concept that CTAs will respond to changes in market prices in a way that astute traders may anticipate. Through replicating Global CTA Positioning data—sourced from Goldman Sachs and Nomura—we examine whether systematic trend-following strategies can be effectively anticipated. We find that the notion that these strategies can be consistently exploited for outsized profits is largely unsupported by empirical evidence.
