Responding to the increased month-end open interest generally observed in the agricultural futures markets, the Commodity Futures Trading Commission has proposed to increase, in some cases significantly, the single-month and all-months-combined speculative position limits for the commodities set out in CFTC Rule 150.2 (other than Chicago Board of Trade Oats). The CFTC has not proposed any changes to the spot month limits. For purposes of determining compliance with the federal limits, the proposal would also require aggregation of traders’ positions on one exchange with any contract listed on another exchange that shares substantially identical terms (including a futures contract that is cash-settled based on the settlement price for one of the contracts in Rule 150.2). The comment period for this proposal closes on December 21.

In a separate release, the CFTC has proposed the adoption of a “risk management” exemption from the federal speculative position limits that would be available to intermediaries (such as index funds) and certain institutional investors whose positions track a broadly diversified index. A “risk management position” would be defined as a futures or futures equivalent position that is held as part of a broadly diversified portfolio of long-only or short-only futures or futures equivalent positions, that is based upon either (i) a fiduciary obligation to match or track the results of a broadly diversified index or (ii) a portfolio diversification plan that has, among other substantial asset classes, an exposure to a broadly diversified index. The risk management position must include the same commodity markets in fundamentally the same proportions as the index being tracked in order to qualify for the exemption; must be established and liquidated in an orderly manner, unleveraged, and passively managed; and cannot be carried into the spot month. Traders would be required to apply to the CFTC for approval to claim the exemption. The comment period for this proposal closes January 28, 2008.