This is excellent -- please put a copy in our SFA compliance file. Thanks!




Paul Simons
08/07/99 14:03
To: ECT London
cc:  (bcc: Scott Sefton/LON/ECT)
Subject: SFA Update: Who can we trade derivatives with?

 This month we are going to look briefly at the types of counterparty with 
which we can trade derivatives in (or from) the UK under SFA (and CFTC) 
rules, and at the principle of selling to them only products which are 
"suitable".

Eligible Counterparties

All derivatives trading in the UK (as you know) must be conducted through 
Enron Europe Finance & Trading Limited, ("EEFT"), which always acts as 
agent.  EEFT may arrange derivatives transactions only with "eligible" 
counterparties.  

                  In general, an "eligible counterparty" is either:

(i) an investment bank that is regulated by SFA (such as Bankers Trust or 
Morgan Stanley) or an overseas dealer in commodity derivatives  authorised by 
its local regulator; or

(ii) a company that has (or whose holding company has) total assets in excess 
of $10,000,000 (approximately o6,500,000); and either

 (a) 20 or more shareholders and a paid up share capital or net assets of at 
least o500,000; or

 (b) fewer than 20 shareholders and a paid up share capital or net assets of 
at least o5,000,000.

Other types of entity may qualify as an "eligible" counterparty, but please 
consult with the Legal Department in these cases.

Suitability Requirements

In addition to the above, each EEFT Registered Representative should 
understand and apply the customer suitability principles that have been 
adopted by ECT. These principles require that Registered Representatives only 
offer products which are suitable for each counterparty, taking into account 
its level of expertise and the use which the product serve.  This means that 
in the case of less sophisticated counterparties or more complex/exotic 
products (or both) extra caution needs to be exercised.  It is also essential 
in all cases that no misleading statements are made (orally or in 
writing).    

                                  Best regards
                                                                           
Paul