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