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

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




