In January 2007, The CFTC is publishing a supplemental COT report that includes, in a separate category, the positions of commodity index traders in certain physical commodity futures markets. These so-called “Index Traders” will be drawn from both the current Noncommercial and the Commercial categories. Coming from theNoncommercial category will be managed funds, pension funds and other institutional investors that generally seek exposure to commodity prices as an asset class in an unleveraged and passively-managed4 manner using a standardized commodity index. Coming from the Commercial category will be entities whose positions predominantly reflect hedging of OTC transactions involving commodity indices—for example, swap dealers holding long futures positions to hedge short OTC commodity index exposure opposite institutional traders such as pension funds. (Note that the four current COT reports will continue to carry commodity index traders in the same Commercial and Noncommercial categories in which they now appear.) The new supplemental report will be restricted to selected commodity futures markets that are included in commodity indices. The Commission believes that these are the markets where the advent of commodity index trading has raised questions as to whether the current classification of traders into noncommercials and commercials has become inadequate and misleading. No such concern has been expressed about financial futures markets or the many commodity futures markets that are not included in commodity indices. At this time, the new report will be limited to agricultural futures markets, and, therefore, it will not include energy and metals futures markets. This determination is based on an evaluation of the large-trader data available to the Commission, and in particular on an assessment of the accuracy with which this data can be parsed out, for firms engaged in commodity index trading, between such index trading and other unrelated trading activity. In the case in energy and metals markets, however, there are alternative U.S. and non-U.S. exchanges and a multitude of OTC markets and derivative products. Many swap dealers, in addition to their commodity indexrelated OTC activity, enter into other OTC derivative transactions in individual commodities, both with commercial firms hedging price risk and with speculators taking on price risk. In addition, some swap dealers are very actively engaged in commercial activity in the underlying cash market, such as a physical merchandising or dealing activity. As a result of these other activities, the overall futures positions held by these energy and metals traders in Commissionregulated markets do not necessarily correspond closely with their hedging of OTC commodity index transactions. Indeed, placing the futures positions of such swap dealers in a commodity index trader category would not accurately reflect commodity index trading activity for energy and metals markets. The Commission, therefore, has decided to proceed with publishing the COT—Supplemental report for the following 12 agricultural commodity futures and options on the following exchanges: corn, soybeans, wheat, and soybean oil on the CBOT; wheat on the KCBOT; cotton no. 2, coffee C, sugar no. 11, and cocoa on the New York Board of Trade; and live cattle, lean hogs, and feeder cattle on the CME. The Commission staff is confident that the new classifications of traders for the COT—Supplemental report for these 12 markets is as accurate as the Commission’s large-trader reporting system allows. The new COT—Supplemental report will be published on a two-year, pilot program basis. During the course of the pilot program, the Commission will assess the relevance and usefulness of the new data and study whether it is possible and appropriate to expand the COT— Supplemental report to include data for other physical commodity markets.