CHESAPEAKE 

January 14, 2008 

Via Electronic Mail: secretary@cftc.gov 

David A. Stawick 

Secretary 

Commodity Futures Trading Commission 

Three Lafayette Centre 

1155 21 51 Street, NW 

Washington, DC 20581 

Re: Proposed Revision of Federal Speculative Position Limits 

Dear Mr. Stawick, 

·R, -,.L c C E _, _ I v ; L r. o· 

C.F. T.C. 

OFC. OF ThE SECRETARIAr 

Received CFTC 

~'~' Sectloo fi(;IJ( 

COMMENT 

We truly appreciate the opportunity to comment on the proposed revision to Fecjeral speculative position 

limits. Chesapeake Capital Corporation, as a long-time trader in the grain mar~ets, has enjoyed seeing 

the growth in these markets over the years. 

We commend the Commission's past approach to expanding limits which has allowed these markets to 

grow as illustrated by the higher open interest over the years. Therefore, we applaud the Commission's 

most recent proposal to increase the Federal speculative position limits for all single-month and allmonths-combined positions in all commodities (except oats) enumerated in regulation 150.2,pursuant to 

parameters specified in Commission regulation 150.5(c). The amendments would also aggregate 

positions in all designated contract market products that share substantially identical terms with the 

contracts enumerated in regulation 150.2 for the purposes of ascertaining compliance with Federal 

speculative position limits. In addition, we agree that if the current structure for establishing the suitable 

size of the position limits under Rule 150.2 is maintained, the Commission should revisit the limits 

periodically and increase them based on increased open interest. 

Some may believe that speculators cause market disruptions and volatility. We think that most would 

agree that speculators have a different approach than hedgers. An analysis conducted by NYMEX noted 

that hedge funds tend to hold positions longer than most, and when evaluated alone, that hedge funds 

actually help to lower price volatility. Some highlights from this study are noted immediately below: 

./ Hedge Funds hold positions significantly longer than other market participants, which supports the 

conclusion that Hedge Funds are a non-disruptive source of liquidity to the market. 

./ With regard to price volatility in natural gas futures, when Hedge Fund activity alone is evaluated, the 

data strongly indicate that changes in Hedge Fund participation result in decreases in price volatility . 

./ Even when Hedge Fund activity in natural gas futures is considered in connection with changes in 

inventory, the data indicate that changes in Hedge Fund participation appear to decrease price 

volatility . 

./ These statistical results are consistent with a positive role provided by Hedge Funds to futures 

markets. 

Chesapeake Capital Corporation 

500 Forest Avenue, Richmond, VA 23229 

www.chesapeakecapital.com 

tel 804.285.5417 fax 804.285.5450 
Chesapeake Capital Corporation 

January 14, 2008 

Page 2 of2 

The supporting research and various findings are further detailed on the NYMEX website (see link below). 

http://www.nymex.com/media/hedgedoc.pdf 

Thank you again for allowing us to comment on the above proposal. 

Sincerely, 

M. Hoade 

ident 

-

cc: R. Jerry Parker Jr., Chairman & CEO, Chesapeake Capital Corporation 

Ani I G. Ladde, Director of Trading, Chesapeake Capital Corporation 

Chesapeake Capital Corporation 

500 Forest Avenue, Richmond, VA 23229 

www.chesapeakecapital.com 

tel 804.285.5401 fax 804.285.5450