Our initial proposal will be for them to keep all their commission and incremental float, and for Enron to keep our spread.  We have talked about it quite a bit and I expect that they will ask for more than this, but we would hesitate giving them the ability to widen our spreads as this could work against the venture if they got too greedy.  Do you have a preference to work into the negotiation?

JC

 -----Original Message-----
From: 	Arnold, John  
Sent:	Tuesday, October 30, 2001 5:41 PM
To:	Cummings, John
Subject:	RE: Refco Update

Are we proposing to pay refco for order flow, like a tick per trade, or are we going to give them our prices and then they widen them to add their juice?

 -----Original Message-----
From: 	Cummings, John  
Sent:	Tuesday, October 30, 2001 2:06 PM
To:	Arnold, John; Nowlan Jr., John L.; White, Bill; Goughary, Jim; Wilson, John L.
Cc:	Shults, Bob; Eichmann, Marc; Richter, Brad; Palmer, Mark S. (ENW)
Subject:	Refco Update

Gentlemen

We met last week with their management and CTO. We have determined the hardware and software requirements for the deal.  We are in the process of drawing up a term sheet and proposing a financial structure.  We have set a meeting for Nov 12 in NYC to get into the details of financial terms and structure.

The deal is going well and we are working with the following hi-level parameters:
Initially 8 Nymex look-a-like-products: Natural Gas (prompt, prompt+1, prompt+2), WTI (prompt), Gasoline (prompt, prompt+1), Heating Oil (prompt, prompt+1)
2 customer buckets with different spreads and volumes: Institutional and Retail
Volumes for Institutional will be 1 contract moving towards 0.5 contract and 0.2 contract possibly to match Nymex mini concept, Volumes for retail will be 0.5 contracts moving to 0.2 contract to match Nymex mini concept
Data feed with price and volumes sent from EnronOnline to Refco system customized and powered by EnronOnline software
Initially target scope is designed for a capacity of 5000 customers, 500 simultaneous
Refco will take credit risk for their customers and post daily collateral with Enron
Refco will pay Enron a one-time license fee for a 3 year contract with an additional annual maintenance & support fee
Enron will keep all additional margin generated by the transactions and Refco will keep the commissions generated and float from additional margin held.

Obviously, the above parameters are the preliminary thoughts and subject to change and negotiation.  We are just beginning to model the potential revenue and cost streams and there will likely be some adjustments that will come out of this exercise.  There are also a number of alternative technology scenarios to pursue if we have more or less money to work with.

Please feel free to call me x36413 if you have any questions or comments.

Regards

John Cummings