Sally / Brent 

FYI - no action required

This note and an earlier email ( forwarded separately ) highlights issues 
around some transactions originated within Metals that arose due to 
'misunderstanding' of limits - which was work in progress for Andrew 
Cornfield ( Risk ), Lloyd Fleming ( RAC ) and Shane Dallman ( FX desk  - 
reporting to Gary Hickerson ) working with the Metal Commercial MDs on the 
subject of an exemption from Corp policy for IR and FX hedging.

It is pleasing that people in the control environment picked up the issues on 
a timely basis but disappointing that a firm conclusion between the 
Commerical groups on 'delegated' limits took longer than anticipated.

If you need any detail please call

Mike


---------------------- Forwarded by Mike Jordan/LON/ECT on 23/11/2000 12:28 
---------------------------
   
	
	
	From:  Lloyd Fleming                           23/11/2000 11:58
	

To: Rick Buy/HOU/ECT@ECT, Michael R Brown/LON/ECT@ECT, Michael J 
Hutchinson/EU/Enron@Enron
cc: Ted Murphy, David Port, Gary Hickerson/HOU/ECT@ECT, Mike 
Jordan/LON/ECT@ECT, Andrew Cornfield/LON/ECT@ECT, Tim R Jones/EU/Enron@Enron, 
Shane Dallmann/LON/ECT@ECT, Robert Soeldner/LON/ECT@ECT 

Subject: Enron Metals FX status

The following issues have been resolved today following discussions with 
Metals Commercial, Risk Management and RAC:

5m Euro prop trade:  It has been agreed that this will be closed out 
immediately.  Metals traders will be advised that FX exposure may only be 
generated as part of a hedge position to an underlying metal trade, and that 
any FX exposure must be laid off via Roger  Murray-Evans (Metals FX trader) 
and the Global Markets desk.

Averaging trades (FX and Bullion): Change method of booking trades so that 
the averaging leg of all trades is booked as it arises (i.e. daily) and the 
resulting FX exposure is captured daily and laid off with Global Markets as 
part of the metals aggregation.

A number of other matters, which have been under discussion for some time, 
were also agreed:- 

Euro / Ali option:  Currently operates under a $30m FX limit and is managed 
by Tim Jones.  It has been agreed that this limit will be reduced to $20m 
(EMRAC to approve) and be a part of Gary Hickerson's limit.  As the options 
expire, the limit will be progressively reduced.  The limit applies only to 
this transaction and does not cover any other FX dealing by Enron Metals.  
Any subsequent transactions of this nature will be covered under separately 
proposed limits.

Overnight exposure: Enron Metals to apply for a small overnight limit to 
cover trades booked after the end of day cut-off.   $2m total net open 
position has been proposed, to be agreed with Gary Hickerson and form part of 
his limits.

FX position management:  FX exposure generated through the day to be 
aggregated and passed to the Global Markets desk.

regards


Lloyd Fleming
RAC Market Risk Management
Ph: + 44 20 7783 4532
Mobile: + 44 7760 17 87 42