March 14, 2000

The Hon. Peter G. Fitzgerald

United States Senator

Kluczynski Federal Building

230 South Dearborn St.

Suite 3900

Chicago, IL 60604

RE: Commodity Futures Trading Commission ("CFTC") Staff Report: A New Regulatory Framework ("Report")

Dear Senator Fitzgerald:

Cargill Investor Services ("CIS") submits this statement on the CFTC Report in response to your request for comment to the Subcommittee on Research, Nutrition and General Legislation of the Committee on Agriculture, Nutrition and Forestry.

CIS is a global Futures Commission Merchant ("FCM") headquartered in Chicago, IL. We are one of the largest independent FCM's in the futures industry. Our client base is broadly diversified and includes leading financial institutions, commercial commodity firms and managed funds that use futures and options markets globally.

The February 22, 2000 Report forwarded by William J. Rainer, Chairman, CFTC to Senator Richard G. Lugar and Representative Larry Combest represents a positive new approach for regulating U.S. futures and options markets. We support the Report's recommendation to move the CFTC from a front line rule based regulator to an oversight regulator providing core principles supplemented with best practices. These changes are an important step in providing the futures industry broader flexibility in responding to the rapidly changing over-the-counter ("OTC") and electronic environments in which narrowly focused rules can no longer keep pace with product innovation and technological change. We believe our customers will welcome these changes. We also congratulate the CFTC staff who prepared this Report. They solicited input from a cross section of industry participants. Recognition should also be given to Commissioner Barbara P. Holum who formed the CFTC's Global Markets Action Committee ("GMAC") two years ago. Because of her efforts to listen closely to industry concerns about regulatory matters, GMAC provided a valuable forum for this industry.

While we broadly support the Report there has been insufficient time to analyze it in great detail and understand all of its implications. We do, however, have a few constructive suggestions regarding major issues discussed in the Report:

1. Legal Certainty for OTC Derivative Contracts

One conclusion of the Report is that there should be legal certainty for OTC financial derivative contracts. Market participants concur. That certainty is equally essential for OTC commodity contracts. OTC commodity markets will continue to grow. These markets are highly developed for commodities such as liquid energy and others, such as electricity, are rapidly maturing. Market participants should be just as free to negotiate OTC commodity contracts as they are OTC financial contracts. In either case, legal certainty is needed to ensure that market participants do not run the risk of one side avoiding performance by arguing the contract was an illegal off--exchange futures or options transaction. This has happened in OTC energy contracts. Action should be taken now so those problems do not grow. We need to encourage the same innovation in commodity markets that we now enjoy in financial markets. Innovation helps consumers and producers better manage risk. Commercial counterparties should be able to negotiate private contracts, be they financial or commodity based, on the same set of rules.

2. Recognized Derivatives Transaction Facilities (DTF's)

A DTF facility as defined in the Report could trade contracts for commodities that have deliverable supplies that are either inexhaustible or sufficiently large to render the contract highly unlikely to be susceptible to manipulation or trade commodities having no underlying cash market.

This definition raises as many questions as it answers. Many contracts that seem to have a nearly inexhaustible supply, such as U.S. Treasury securities, have been subject to price manipulation. And their supply is far from inexhaustible. But clearly no one feels they should be excluded from trading on a DTF facility.

A definition that we believe better meets the public interest would be one restricting commodities traded on a DTF facility to those contracts that do not serve a price discovery function. When a contract does serve such a function there is broad public interest in making certain the markets involved operate at the highest possible level of integrity and transparency. We believe this definition would provide greater clarity for the CFTC than one focused on physical supplies.

3. Stock Index Products

Our customers want to trade more stock index contracts on foreign exchanges. And they want the opportunity to trade individual stock futures contracts on U.S. exchanges. The Shad-Johnson Accord restricts U.S. customers from accessing some of the most rapidly growing exchange traded contracts globally. U.S. futures exchanges are now disadvantaged because the SEC has been more restrictive in approving stock index futures contracts trading on futures exchanges than index contracts traded on securities exchanges. This puts futures exchanges at a disadvantage. Our customers want broader access to all forms of equity contracts wherever they trade.

4. Competition

As an FCM, we operate in a highly competitive environment that fosters innovation and change. We would expect to see new electronic futures exchanges being developed just as we have witnessed significant growth in new markets for trading equities and bonds. The CFTC should provide clear guidelines for new exchanges to follow as well as a prompt, fair evaluation of core criteria before such exchanges begin operation.

5. A First Step

As a global FCM we see a world outside the U.S. that looks significantly different and that provides customers significantly more flexibility than what exists within the U.S. today. Most futures exchanges are teaming with equity exchanges in their domestic market to provide product diversity, common clearing and a common trading platform all under a single regulator. We need a regulatory framework that allows and encourages this product integration in the U.S. as well.

CIS appreciates the opportunity given to comment on the Report and we would be pleased to provide any further input that might you find helpful.

Sincerely,

Jan R. Waye

Senior Vice President