Enron Mail

From:jim.schwieger@enron.com
To:john.lavorato@enron.com
Subject:VAR LIMITS
Cc:
Bcc:
Date:Tue, 24 Apr 2001 13:41:40 -0700 (PDT)

I know you are frustrated with the adherence to the VAR limits or lack there of, so I do not want to frustrate you more, but I would like you to consider the following suggestions.
1) It does not seem logical that the VAR limit between the Central, East and Texas Desk be so far apart. Under the current limits the Central desk can have a position 2,000 Contracts larger than Texas and the East Desk 1,000 Contracts larger.
2) When looking at performance YTD I wonder if higher VAR limits only gives the desks a greater ability to double down to try and make up the YTD losses.
VAR LIMITS DESK P/L
EAST $10 MILLION ($66.1) MILLION
CENTRAL $12 MILLION ($13.9) MILLION
TEXAS $8 MILLION $55.8 MILLION
3) It also bothers me that everyone else does not hold the VAR limits in as high regard as Tom & I. There are no consequences if the VAR limit is violated. In fact in days like today you are rewarded for breaking the VAR limit. I feel that the following should be implemented in order to stress the importance of the VAR limit.
The P/L for any desk exceeding the VAR Limit by more than $500,000 will be decreased each day by the amount they exceeded the VAR limit.
(For example if a desks VAR limit is 10,000,000 and the VAR is $12,000,000 the P/L for the desk would be decreased by $2,000,000. If the situation is not corrected by the next day the same procedure would be followed.)
This method I believe makes for an even playing field. Under the current procedures what I'm learning is if you ignore the VAR limits and you are right no one will remember at year end and you are rewarded for breaking the rules.

Please give me your thoughts when you have a chance.

Thanks, Jim