Re: Foreign Exchange from a US entity

----- Forwarded by Sara Shackleton/HOU/ECT on 08/14/2000 03:29 PM -----

Trena McFarland
08/10/2000 10:03 AM

To: Sara Shackleton/HOU/ECT@ECT, Donna Lowry/HOU/ECT@ECT
cc:
Subject: Re: Foreign Exchange from a US entity

---------------------- Forwarded by Trena McFarland/LON/ECT on 10/08/2000
16:05 ---------------------------

Jon Barrett@MGLTD
03/08/2000 08:10
To: GILBERGD@sullcrom.com
cc: Janine Juggins/LON/ECT@ECT, Andrew Cornfield/LON/ECT@ECT, Trena
McFarland/LON/ECT@ECT, Paul Simons/LON/ECT@ECT, Kevin
Rhodes/MGLTD_London/MGLTD@MGLTD, Sid Tipples/MGLTD_London/MGLTD@MGLTD

Subject: Re: Foreign Exchange from a US entity

David

The US entity we're considering at the moment is an FCM, regulated by the
CFTC and which is a member of NYMEX/COMEX. It currently clears the NY
exchanges metals business for the group. It will probably be utilised to
clear the NY exchange energy business following the Enron tie up. It may
assist in clearing CSCE business but is unlikely at this stage to be looking
to be a CSCE exchange member.

It currently has capital of $2 million and subordinated debt of $20 million.
Profits are generally paid out in the form of a dividend so although it may
have a small amount of retained profit it won't be material. Currently it has
about $10 million of regulatory capital requirements.

Depending on your advice, we may consider an un-regulated company with, at
the moment, not very much capital. This latter point could be rectified,
either with subordinated debt or capital injection. The EFP customer
facilities (approximately 50% of the business) may prohibit this.

I hope this is enough info.

Best regards.

Jon

GILBERGD@sullcrom.com on 03/08/2000 03:57:28
To: jbarrett
cc:

Subject: Re: Foreign Exchange from a US entity

Thanks. I will prepare a memo. One question on your e-mail -- can you give
me a bit more information about the US entity that will be the FX dealer?
For example, is it currently regulated in any respect? Is it, or will it be,
engaged in any other businesses? How large is it in terms of assets or net
worth? Thanks. I'll get back to you soon.

<<< <jbarrett@mgltd.com< 08/01 1:32 PM <<<

David

Further to our recent telephone conversation, we would be grateful if you
would
give us a brief written summary on the regulatory and/or legal issues
governing
a US corporation transacting foreign exchange with US and non-US customers. My
basic understanding of our telephone conversation was that, as a non-bank,
neither the Fed, the SEC nor the CFTC have any jurisdiction. However the
Commodities Exchange Act prohibits us from contracting with certain types of
counterparties.

The potential business we are looking at currently covers outright foreign
exchange with counterparties such as banks, securities houses, funds,
corporates
and, possibly, high net worth individuals. The business also covers the
provision of EFP facilities for these customers whereby they ultimately
receive
a currency futures position on the IMM division of the CME or on FINEX. This
latter area is one where, from the Exchanges' points of view, we would
effectively be acting as an executing broker.

I hope this brief description is enough for you to be able to respond but if
you
have any questions or would like further clarification, you can contact me by
e-mail or by telephone on +44 20 7265 5421.

Thank you for your help in this.

Kind regards.

Jon Barrett

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