AbstractUsing positions data for 18 commodity futures during 2001–2020, we examine systematic and idiosyncratic determinants of Amihud price impact and microstructure noise proxying for permanent and transitory components of commodity futures liquidity. Idiosyncratic factors have the largest economic impact: while excess hedging demand increases PI and noise, active position‐taking (by market‐makers) in excess of the hedging demand reduces noise. Systematic factors, including the lack of competition among liquidity providers, adversely impact liquidity, but this effect is mitigated if liquidity providers are well‐capitalized. Supplementary leverage ratio (SLR) makes holding inventory costlier and is associated with lower liquidity.