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DB Commodity Services LLC 

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David Stawick 

Secretary 

Commodity Futures Trading Commission 

Three Lafayette Centre 

1155 21 51 Street, NW 

Washington, DC 20581 

January 28, 2008 

Group 

DB Commodity Services LLC 

60 Wall Street 

5th Floor 

New York, NY 1 0005 

COMMENT 

Re: Risk Management Exemption from Federal Speculative Position 

Limits-- Comment File 07-015 

Dear Mr. Stawick: 

Thank you for the opp01iunity to comment on the above-referenced proposal. We 

support the Commission's proposal to provide an exemption from Federal speculative 

position limits for "risk management positions." However, we respectfully request that 

the Commission consider making the exemption available based on factors other than 

those outlined in the proposal. We also request that the Commission clarify some 

technical points in the proposed rule. 

Specifically, we believe that the exemption should be available for all exchangetraded commodity pools following passive indexes that do not include spot futures 

positions ("Passive Pools"), which would put Passive Pools on an even footing with 

swaps and other products with respect to this issue. 

I. The Exemption should be Available to All Passive Pools 

Purpose of Speculative Limits 

Section 4a of the Commodity Exchange Act, pursuant to which Commission 

regulations 1.3(z) and 1.47 were adopted, authorizes the Commission to set speculative 

trading and position limits "for the purpose of diminishing, eliminating or preventing ... 

excessive speculation" (commonly referred to as "Spec Limits"). Spec Limits only apply 

to speculators. Hedgers are exempted from Spec Limits. Commission regulation 1.3(z) 

provides, in pertinent part, that hedging transactions are transactions that are 

"economically appropriate to the reduction of risks in the conduct and management of a 

commercial enterprise." 

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Exchange-Traded Pools following Passive Indexes are not Speculators 

Exchange-traded Passive Pools are commercial enterprises in the business of 

offering investors convenient access to commodity index returns. Their only commercial 

activity is to track a commodity index by buying and selling futures contracts using a 

non-discretionary strategy. Because CPOs and CTAs ofPassive Pools have a fiduciary 

duty to follow an index and are not able to enter into discretionary trades, there is no 

motive to speculate, and Passive Pools therefore are not able to be speculators. 

Exemption should not be Limited to Pools Following Broadly Diversified 

Indexes 

There is no valid reason to limit the proposed exemption only to commodity pools 

following a "broadly diversified index", and imposing the "broadly diversified index" 

requirement does not comport with Commission precedent in this area. Indeed, in the 

rule proposal, the Commission notes that it has in the past granted no-action relief to 

swap transactions on indexes composed of wheat, com and soy. Accordingly, we believe 

that the exemption should not focus on whether a commodity pool is following a broadly 

diversified index. 

Passive Pools should be Treated like Swaps 

Rather, the Commission recognizes in the proposed rule that it has granted hedge 

exemptions in the past to swap providers under certain conditions. We propose that the 

Commission allow Passive Pools' futures contracts to be considered "risk management 

positions" under the same criteria that the Commission cites in the proposed rule as 

having been imposed on swap providers - -

1. The futures positions must offset specific price risk. In the case of a 

Passive Pool, the pool should only be allowed to classify a futures position as a "risk 

management position" if the Passive Pool has disclosed to investors in a prospectus or 

other disclosure document that the Passive Pool's investment objective is to follow a 

particular commodity index that includes the particular future that the Passive Pool seeks 

to classify as a risk management position. 

2. The dollar value of the futures positions would be no greater than the 

dollar value of the underlying risk. The Passive Pool must have a fiduciary duty to 

investors to track a commodity index as closely as possible. 

3. The futures positions would not be carried into the spot month. A Passive 

Pool would not be able to avail itself of the exemption if the index it followed included 

spot positions. 

Passive Pools Aid the Commission's Ability to Prevent Excessive Speculation 

Although the Commission expresses concern in the proposal that Passive Pools 

might be used by investors to circumvent position limits, we believe that the Commission 

would further its mandate to diminish excessive speculation by encouraging product 

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providers to give investors exposure to commodity indexes in the form of exchangetraded Passive Pools, which are within the Commission's jurisdiction and which the 

Commission therefore can monitor more easily. Exchange-traded Passive Pools afford 

the Commission the ability to better monitor real aggregate exposure to particular 

commodity futures because exchange-traded Passive Pools are particularly transparent. 

Trading in exchange-traded Passive Pools and their assets under management are 

observable daily. Because the Commission has jurisdiction over exchange-traded Passive 

Pools, it could react to any observed potential excessive speculation by imposing 

emergency position limits on the particular pool. 

Additionally, we believe that the Commission should balance its concern that 

Passive Pools might be used by investors to circumvent position limits with the 

recognition that providers of investment products may opt to avoid the CFTC regulatory 

regime entirely by issuing swaps or other products that allow providers to offer investors 

exposure to commodity indexes without being subject to position limits. By providing an 

even playing field for exchange-traded Passive Pools, swaps and other products, the 

Commission will ensure that the position limits rules do not inadvertently encourage 

product providers to offer commodity-linked investments in forms not subject to the 

Commission's jurisdiction. 

II. Additional Considerations 

We believe that the following points may be implicit in the proposed rule, but we 

request that the Commission clarify in the final rule that - -

1. The concepts of a "passively managed position" and "limited discretion" 

should include both the ability to exercise some discretion with respect to when to roll 

futures positions forward (as is mentioned in the proposed rule) and discretion regarding 

the expiration month of the contracts to which an index will roll. The proposed rule 

could be read to limit the availability of the exemption only to indexes that roll futures 

positions forward "into the next delivery month". 

2. Commodity pools following indexes under the proposed rule should be 

able to post as collateral cash equivalents such as money market mutual funds, as well as 

cash and U.S. Treasuries, in accordance with current Commission margin rules and noaction relief. 

3. The exemption should not be all-inclusive and other index-based positions 

should be eligible for risk management relief on a case-by-case basis. 

4. Exchanges should be able to adopt similar exemptions. 

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Thank you again for giving us the opportunity to comment on the abovereferenced proposal. 

Respectfully submitted, 

By: __ +f---\:JW--=--><-->"+-------

Greg 

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