Late last week, the Commodity Futures Trading Commission released a staff report on its recent analysis of trading by commodity swap dealers and index traders. The report, based on information gathered through the CFTC’s June 2008 special call, analyzes data from the period between December 31, 2007 through June 30, 2008. Among other findings noted in the report, the approximately 30% increase in the notional value of crude oil during the period studied appeared to be attributable entirely to the appreciation of existing investments, rather than increased commodity index investment. The staff found a net decline of equivalent long futures contracts over the same period.

The staff report also makes several preliminary recommendations regarding ongoing monitoring and potential regulation of the activity of over-the-counter swap dealers and commodity index traders, including the creation of a new swap dealer classification for inclusion in the CFTC’s Commitments of Traders Reports, as well as the publication of a new periodic supplemental report on swap dealer activity. The report also suggests the potential elimination of the bona fide hedge exemption for swap dealers and its replacement with a more limited “risk management” exemption.