Enron Mail

From:lisa.yoho@enron.com
To:richard.shapiro@enron.com
Subject:Re: EOL Regulation - CFTC or FERC?
Cc:
Bcc:
Date:Thu, 7 Jun 2001 01:56:00 -0700 (PDT)

Rick:

As background to this meeting, I wanted to provide you with my understanding
of the CFTC's current regulations:

Because EOL is a "bilateral" trading platform (one-to-many), the platform is
currently exempt from CFTC regulation, with the exception of the CFTC's
anti-fraud and anti-manipulation laws.

With the passage of the CFMA, energy derivatives are exempt from CFTC
regulation, except for certain minimum requirements. While the CFTC can no
longer dictate how we structure energy swaps, we can only do business with
"eligible contract (or swap) participants." Eligible contract/swap
participants must meet a net worth test of $1m (for business entities). The
same net worth test applies to energy options (the CFMA eliminated the
"physical handling" requirement, which required participants to be in the
physical business before entering into energy option transactions).

In my non-legal opinion, the CFTC has jurisdiction over EOL as a bilateral
trading platform, and over financial transactions (whether or not they are
transacted through EOL, over the phone, etc.). This jurisdiction would be
limited as discussed above.

Thanks.

Lisa




James D Steffes
06/06/2001 05:45 PM

To: Steven J Kean/NA/Enron@Enron, Richard Shapiro/NA/Enron@Enron, Mark E
Haedicke/HOU/ECT@ECT, Mark Taylor/HOU/ECT@ECT, Lisa Yoho/NA/Enron@Enron,
Sarah Novosel/Corp/Enron@ENRON, Linda Robertson/NA/Enron@ENRON, Christi L
Nicolay/HOU/ECT@ECT
cc:
Subject: EOL Regulation - CFTC or FERC?

As you are all probably aware, FERC staff will be conducting a visit to Enron
next Monday to discuss EOL and electronic trading's role in the energy
markets. Dave Forester, Kevin Presto, and Phillip Allen will be giving
presentations about the EOL platform, power trading, and gas trading,
respectively.

In preparing for the meetings, the issue of which agency, CFTC or FERC,
regulates the EOL platform and any energy related financial products sold by
Enron (everyone agreed that physical deals through EOL were FERC
jurisdictional) came up.

It is unclear about Enron's current position. While there is a strong case
that both the EOL platform and any energy related financial products are
regulated by the CFTC, some people believed that Enron had previously
informed FERC that they were the "appropriate" agency for the energy related
financial products.

We do not intend to make an issue of this topic with the FERC staff on
Monday, but rather wanted to make sure that everyone was on the same page
going forward.

Please let me know if we need to have a meeting to bring this to closure.

Jim