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Enron Mail |
FYI.
Susan, can we discuss this later this week? Alan ----- Forwarded by Alan Aronowitz/HOU/ECT on 09/19/2000 09:35 AM ----- Darren Delage@ENRON 09/18/2000 09:22 PM To: Alan Aronowitz/HOU/ECT@ECT, John Viverito/Corp/Enron@Enron, Jane.McBride@Enron.com cc: Gary Hickerson/HOU/ECT@ECT Subject: Enron Global Mkts Asian trading overview Further to our meeting this morning, please find a summary of the core trading vehicles that I believe have direct application in the Japanese/Asian marketplace and as such should be considered in terms of legal operating framework. As mentioned, ENA has already entered into 3 f/x swaps with Enron Metals to convert a fixed yen price aluminum exposure into fixed dollar amount. Apparently, the market for this type of trading activity has reignited after years of latency and as such I suspect that Enron Metals will have regular business for the f/x trading desk. Basically, two main sources of financial activity, which I have arbitrarily named local opportunities and trading . 1. Local Opportunities ESSENTIAL: ability to mitigate financial exposure to interest rate and/or forex changes on exposures originating from Enron's Asian activities. Example: Enron Metals f/x exposure inherent in aluminum swap. In the past, MG would back-to-back this transaction with a financial counterparty. Enron stands to benefit considerably by having Global Mkts assume responsibility for hedging this instead for both obvious reasons {such as the crossing of book exposures which saves the firm bid/offer spread on hedge product} and more subtle reasons {credit management, counterparty relationships, trading views,etc}. Other "high potential" examples include: a.Commodity prepays (interest rate swap + credit wrapper + commodity swap). Conventional financing approach that may have application in Japanese marketplace, given difficulty that corporates can sometimes encounter raising funds through conventional banking channels due to bank liquidity constraints. b.JGB locks (hedge preceding anticipated issuance, for example involving short-sale of JGBs and term reverse-financing) c."Par Forward" F/X Swaps: Exchange of an uneven set of cashflows in currency a for currency b denominated cashflows at a fixed exchange rate. d.Anticipatory exposure hedging: Options on Interest Rates and/or f/x on set exposures with an uncertain probability of occurrence. ( For example a bid submitted for an asset with cashflows subject to f/x exposure- if the bid is successful, exposure is certain, if bid is unsuccessful, exposure is zero.) 2.Trading Needs ESSENTIAL: North America maintains open exposures that will be monitored, rebalanced, adjusted for significant and market-moving changes during Asian time zone. Houston portfolio is comprised of equity, interest rate and forex positions. Equity index futures are an important part of Financial Trading strategy, albeit I understand that they fall into a more onerous regulatory framework. IDEAL: Discretion over execution vehicle and timing of execution {ie otc versus futures to take advantage of relative richness/cheapness in desired hedge vehicle, favorable financing, arbitrage} Summary of "Indispensable" investment vehicles a. Over the counter Libor indexed fixed-for-floating swap b. Over the counter basis swaps (receive floating rate in one currency libor, pay floating rate in another with exchange of notional up front) c. Spot foreign exchange d. Forward foreign exchange is basically a combination of the above three products e. FRA's: basically decomposition of a swap into it's smallest components but enables more precise hedging f. Cash JGB's plus repo g. Futures (JGB's) usually underlying is determined as the cheapest-to-deliver of a basket of deliverables based on implied financing to futures settlement. h. Options on all above products (OTC) Others Eventually, would entertain: -Equity baskets, equity index derivatives, exchange traded-options Please let me know if there are any other details I can provide to facilitate our research. Sincerely, Darren
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