Re: New Regulatory Framework Proposed for Derivatives by Staff of the
Commodity Futures Trading Commission


                     Attached is a memorandum from Sullivan & Cromwell
concerning the above subject. A summary is also included at the end
of the text of this e-mail message.

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Hard copies can be obtained from Ivy Moreno at S&C in New York,
telephone 212-558-3448, e-mail: Morenoi@sullcrom.com.


SUMMARY

                    A task force of staff members from the Commodity Futures 
Trading
Commission (the "CFTC") issued a report in late February that recommends ways
to modernize the regulation of exchange and electronic trading of 
derivatives.  The
report, entitled A New Regulatory Framework (the "Report"), proposes a 
significant
restructuring of the CFTC's regulatory responsibilities in an effort to 
provide markets
with flexibility to respond to  technological and competitive challenges.  In 
particular,
the task force recommends the adoption of a three-tiered regulatory framework 
for
derivatives exchanges and other trading facilities that are or may be within 
the CFTC's
jurisdiction.  This framework would establish differing levels of oversight 
depending on
 the nature of the commodities traded and the sophistication of the market 
participants.
The Report also proposes that the CFTC regulate the markets and entities that 
it oversees
based on flexible "core regulatory principles" rather than prescriptive, 
technical rules.


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 - CMS10763.pdf