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Enron Mail |
This is certainly a tough one. We go to great lengths to avoid regulation
here and have been fairly successful to date. We do have some oversight from the Federal Energy Regulatory Commission (FERC) regarding our power trading and pipeline activities and local state regulators keep an eye on our purely intrastate pipeline activities, but for the most part we are unsupervised. If it helps, we conduct our derivative trading operations in accordance with Commodity Futures Trading Commission (CFTC) regulations (but that's just complying with the Eligible Swap Participant and Trade Option Exemption rules). It is true we are a member of the NYMEX and subject to their rules but they relate almost exclusively to trading on the NYMEX. It might be more helpful to talk to the guys in London about our SFA regulatory status. We have quite a bit more supervision there than we do here in the states. David Minns@ENRON_DEVELOPMENT 06/13/2000 02:56 AM To: Mark Taylor@ECT cc: Robert McGrory/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Sara Shackleton@ECT, Paul Quilkey/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT Subject: EFMD application Mark, we are attempting to get a broad approval to trade any types of products in Australia through EnronOnline. (Currently our ability to trade products other electricity through EnronOnline using standardised documentation is not beyond doubt). What the Australian regulators are looking for is for us to point to a regulatory oversight in the US of Enron's trading activities. They hopefully then will back off. Particularly they want us to demonstrate there are some prudential requirements Enron Corp. needs to meet in respect of trading activities. Pardon my complete ignorance but are there any? Would membership of NYMEX be relevant? --------------------- Forwarded by David Minns/ENRON_DEVELOPMENT on 06/13/2000 06:19 PM --------------------------- "Farrell, Scott" <Scott.Farrell@msj.com.au< on 06/13/2000 06:29:38 PM To: "'david.minns@enron.com'" <david.minns@enron.com< cc: "James, Martin" <Martin.James@msj.com.au< Subject: EFMD application Mallesons Stephen Jaques Confidential communication David I have just had another call from ASIC (Alan Worseley and Tim Hardman). It seems that there is a single significant policy concern for the ASIC policy committee. This arises because ASIC believes that a significantly wider range of sophisticated counterparties will be interested in the EnronOnline products (such as weather and credit) than those that are interested in Australian electricity derivatives. As a result, ASIC is not able to simply "transfer-across" its approval of EAF under the electricity declaration without separate consideration as to how EAF can meet the prudential regulation criteria specified in PS 70. They have asked for further information in this regard. Obviously I mentioned the presence of the Enron Corp guarantee. However, ASIC may require something further, such as evidence of procedures in place to prevent an Enron failure. PS 70 states in this regard (in paragraphs 46 and 47): "The ASC considers that providers of safe harbour market facilities should be subject to regulation which at least sets minimum capital standards and ensures regular reporting against them. This is because the financial stability of a facility provider is a crucial factor in the stability of any market conducted by that provider. This will ensure that risks associated with the conduct of a safe harbour market are monitored. Standard setting and monitoring will contribute to the continued financial stability of the facility provider. If the facility provider is a significant participant in other markets, it will also help prevent any adverse consequences for those markets if the facility provider fails. Regulatory supervision of this kind may occur in a number of ways. For the purposes of the ASC's policy, it is not the identity of a particular supervisory authority that is important, but the fact that the organisation is subject to supervision which produces the results mentioned in para 46. Regulatory supervision will meet this test only if the capital standards which it imposes on an organisation take into account the organisation's derivatives market activities." The following paragraphs are also explanatory, particularly as they refer to certain US licensees. Are any Enron entities subject to prudential or similar regulation due to the licences/authorisations which they hold? This could be a useful starting point. They also mentioned that there may be difficulty in achieving the 23 June timetable. However, the focus of the discussion was the policy issue rather than timing. Best regards Scott Farrell Senior Associate Mallesons Stephen Jaques Sydney Direct line (61 2) 9296 2142 Fax (61 2) 9296 3999
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