CFTC to up spec limits.

The Commodity Futures Trading Commission (CFTC) in March proposed an increase in speculative trading limits for Chicago Board of Trade agricultural contracts as well as wheat contracts at the Kansas City Board of Trade and Minneapolis Grain Exchange and cotton at the New York Board of Trade.

In 2004, the grain exchanges petitioned the CFTC to drop all speculative limits and, short of that, asked for expanded limits. While the CFTC in its rule proposal did not eliminate speculative limits, its proposed limits, in some cases, are greater than what the exchanges asked for. Single month limits in corn are currently 5,500 contracts. The CBOT requested they be upped to 10,000 and the CFTC proposed a limit of 13,500. While most managers rarely run into speculative limits some of the largest funds have had to go into the OTC market to execute their grain positions.

Agricultural-based Commodity Trading Advisor Richard Crow doesn't need higher limits but says that increased limits will, at times, increase volatility. "It will increase disequilibrium, which is good and bad."

Neal Kottke, chairman of Kottke Associates LLC, supports the increase and says that limits do not factor into market liquidity. "The market in total determines what the market will bear," Kottke says.

Barry Sims, director of operations for Abraham Trading Co., says the increase will not change how their program trades but adds, "The increase in spec limits will give us room to grow."

Kottke says that the increase could bring some business that had moved to the OTC market back to the exchanges.

CFTC-SEC CLOSE TO DEAL?

For managers who come under the regulatory oversight of both the CFTC and Securities and Exchange Commission, it is not news that the two agencies operate differently. The Commodity Futures Modernization Act, which lifted restrictions on single stock futures and narrow based indexes, forced the regulators to work cooperatively. That effort was a struggle and many people feel that the SEC's stubbornness in regard to allowing risk-based margining for the hybrid products is a reason they have not met expectations.

As the SEC moved to require registration of hedge fund managers, they further crossed regulatory lines and the CFTC would like the SEC to remain on its own side of the street.

At a recent CFTC forum on commodity pools, acting CFTC Chairman Sharon Brown-Hruska pointed out the inefficiencies of having certain investment mangers face dual regulatory burdens but was optimistic that a more cooperative era may be in the offing.

"I firmly believe that CFTC registrants who sponsor, operate or advise identified commodity pools should be exempted from the SEC's new rule. It is just common sense that two agencies should not spend taxpayer money doing the same thing," Brown-Hruska said, before noting, "The senior staff of the SEC and CFTC have met two times this year on the issue and have made what appears to be significant progress on a 'primarily engaged' test."

Brown-Hruska went on to say additional meetings are scheduled between the two agencies and she is cautiously optimistic an agreement will be announced by late spring, if not earlier.

She would not be the first person, however, to be disappointed by a lack of action by the SEC.

Comparing index returns

                                          February    YTD

S & P 500 Total Return Index               +2.10%     -0.38%
Lehman Brothers Treasury Index             -1.29%     +1.22%
Morgan Stanley EAFE Index                  +4.14%     +2.19%
Futures Public Funds (February)            -0.50%     -5.82%

December's top CTAs

                                          February     YTD

Barclay CTA Index                           0.00%     -2.95%
Barclay Sub-Indexes:
Agricultural Traders                       -4.32%     -2.04%
Currency Traders                           -0.01%     -2.77%
Diversified Traders                        +0.43%     -4.18%
Financials and Metals Traders              +0.36%     -0.97%
Discretionary Traders                      -0.30%     -0.35%
Systematic Traders                         +0.24%     -0.34%

More than $10 million under management
1. AIS Futures Fund L.P. (3X-6X)          +26.64%    +25.89%
2. AIS Futures Fund II L.P. (2X-4X)       +16.29%    +16.66%
3. Hawksbill Capital Mgmt. (Gl. Divers,)  +15.63%     +5.42%
4. Jaguar Investments (Metals)            +10.06%     +7.14%
5. Commodity Fut. Services (IPATS)         +9.10%     -0.06%

Less than $10 million under management
1. Di Tomasso Group (Equilibrium)         +27.83%    -20.65%
2. Pacific Futures Ltd (Sh. Term USD)     +25.50%    +33.16%
3. MCTS Capital Strategies                +21.82%     +3.43%
4. Fortissimo LLC                         +19.59%     -1.07%
5. James H. Jones (Diversified)           +15.60%     +6.01%

Based on estimates of the composite of all accounts under management;
does not reflect the performance of any single account.
Source: Barclay Trading Group Ltd., Fairfield, Iowa; (641) 472-3456

Futures public funds summary

March 2005                     Number reporting: 73
                               Average performance for the month: -0.63%
                               Funds up: 20 Down: 53 Unchanged: 0

Top performers in March
                                                         March
Fund                           Trading advisor(s)        Return   YTD

Smith Barney AAA Energy        AAA Capital Management    9.48%    26.33%
SB AAA Energy Fund L.P. II     AAA Capital Management    9.41%    26.16%
Salomon Smith Barney Orion     Multiple managers         7.15%     8.99%
  Futures Fund
Triad Trading Fund LP          AAA Capital               6.85%    19.29%
                                 Management
Global Futures Fund XII Ltd.*  Man Investments           3.22%    -3.52%

Worst performers in March
Blue Danube Fund-Futures       Merit                    -8.50%   -20.46%
  Aeneas*
Shearson Select Advisors       J.W. Henry               -6.32%   -23.05%
  Futures Fund
Bund/Bond Program*             Michael N. Trading       -5.45%    -7.24%
                                 Co. Ltd.
FTC Futures Fund Dynamic EUR*  FTC Asset Mgmt.          -5.35%    -9.41%
SB Fairfield Futures Fund      Multiple Managers        -4.75%   -17.00%
  L.P.

2005 results                   Number reporting: 73
(through Mar. 28)              Average performance for the year: -4.29%
                               Funds up: 15 Down: 58 Unchanged: 0

Top performers in 2005
Fund                           Trading advisor(s)  March Return  YTD

Smith Barney AAA Energy        AAA Capital               9.48%    26.33%
                                 Management
SB AAA Energy Fund L.P. II     AAA Capital               9.41%    26.16%
                                 Management
Triad Trading Fund LP          AAA Capital               6.85%    19.29%
                                 Management
Smith Barney Orion Futures     Multiple managers         7.15%     8.99%
  Fund
Alternative Opportunities      Karin Kisling             0.35%     2.60%
  Fund*

Worst performers in 2005
Shearson Select Advisors       J.W. Henry               -6.32%   -23.05%
  Futures Fund
Smith Barney Mid-West Futures  J.W. Henry               -0.90%   -21.09%
  II
Shearson Mid-West Futures      J.W. Henry               -0.90%   -21.05%
  Fund
Smith Barney Westport Futures  J.W. Henry               -0.70%   -20.82%
  Fund
Blue Danube Fund--Futures      Merit                    -8.50%   -20.46%
  Aeneas*

Note: Listed return may not be fully attributable to listed advisor(s).
* Offshore fund.