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Enron Mail |
Further to recent correspondence on this subject:
"Killing" EnronOnline deals has always been against policy, for a number of reasons, including the need to demonstrate to customers that this is a binding way to do deals and also to provide an auditable process to auditors who may be sceptical of an online transaction system - i.e. we need to show that clicking on the screen results in a deal which results in an invoice every time. In the same way that it is rare to conclude a transaction by telephone with a trader and then attempt to "back out", we must ensure it is a rare event on EnronOnline. Deals can only be terminated under special circumstances, which must be approved on a case-by-case basis by the legal department in consultation with Credit and EnronOnline commercial staff and covered with a special contract entered into with the Counterparty. In all other circumstances, "undoing" a deal is at the discretion of the trader and is most easily accomplished by an OTC transaction which reverses the volume, price and payment impact, thus addressing most of the concerns raised below. Dave Brent A Price 03/08/2000 09:02 AM To: Sheri Thomas/HOU/ECT@ECT cc: Kathryn Cordes/HOU/ECT@ECT, Mark Taylor/HOU/ECT@ECT, Susan Harrison/HOU/ECT@ECT Subject: Feedback on EOL killed deals process I find it difficult to believe we would even be considering the use of OTC trades to effectively "kill" another deal. The points Kathryn raise below are good ones. How often do deals need to be terminated? Unless that number is substantial (and I would hope it is not), why the opposition to executing a termination agreement with the counterparty and resolving the problem in the cleanest manner? ---------------------- Forwarded by Brent A Price/HOU/ECT on 03/08/2000 08:57 AM --------------------------- Kathryn Cordes 03/07/2000 10:53 AM To: Sheri Thomas/HOU/ECT@ECT, Mark Taylor/HOU/ECT@ECT cc: Brent A Price/HOU/ECT@ECT, Susan Harrison/HOU/ECT@ECT Subject: Feedback on EOL killed deals process Sheri: Last week you provided me with the options for a process that you and Louise were working on for killed deals. The 2 options for killed deals were 1. the counterparty would call and execute an OTC to back out the deal (the opposite of whatever he transacted on line) and 2. Enron would execute to the counterparty a termination agreement per deal the counterparty wanted to back out. My concerns for the first option are: 1. This potentially would not create a true net effect- timing from the EOL trade and the phone call to execute the OTC could have price differences 2. The confirmation process is impacted, would have to generate 2 confirms, one for each side of the trade 3. Logistics would still have to nom and schedule for delivery both deals, may not be even volumes 4. Settlements will see both invoices, again due to possible price and volume changes, will not be even netting The termination agreement would be the easiest process for the back office teams and would minimize the downstream effects to these processes. The execution of termination agreements would be the strongest way to minimize our exposure to these deals since we have the Electronic Transaction Agreement in addition to the contract that governs the confirmation with the counterparty in place. I know that commercial has a preference to option one but I want to make sure that all the issues are thought through with the possible impacts to the operations raised. I've asked Scott Mills to explore Sitara for possible lock down of EOL deals after validation to ensure that there is tighter control over the deals for further exposure to potential modifications or kills. Scott has indicated that the lock down of critical fields would be a big system change, but has agreed to review this and determine exactly what the IT estimates would be. After we look at the Sitara requirements to support this change I will provide additional feedback. KC
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