FYI. 

Susan, can we discuss this later this week?

Alan
----- Forwarded by Alan Aronowitz/HOU/ECT on 09/19/2000 09:35 AM -----

	Darren Delage@ENRON
	09/18/2000 09:22 PM
		 
		 To: Alan Aronowitz/HOU/ECT@ECT, John Viverito/Corp/Enron@Enron, 
Jane.McBride@Enron.com
		 cc: Gary Hickerson/HOU/ECT@ECT
		 Subject: Enron Global Mkts Asian trading overview

Further to our meeting this morning, please find a summary of the core 
trading vehicles that I believe have direct application in the 
Japanese/Asian  marketplace and as such should be considered in terms of 
legal operating framework. As mentioned, ENA has already entered into 3 f/x 
swaps with Enron Metals to convert a fixed yen price aluminum exposure into 
fixed dollar amount. Apparently, the market for this type of trading activity 
has reignited after years of latency and as such I suspect that Enron Metals 
will have regular business for the f/x trading desk.

Basically, two main sources of financial activity, which I have arbitrarily 
named local opportunities and trading .


1. Local Opportunities

ESSENTIAL: ability to mitigate financial exposure to interest rate and/or 
forex changes on exposures originating from Enron's Asian activities. 
Example: Enron Metals f/x exposure inherent in aluminum swap. In the past, MG 
would back-to-back this transaction with a financial counterparty. Enron 
stands to benefit considerably by having Global Mkts assume responsibility 
for hedging this instead for both obvious reasons {such as the crossing of 
book exposures which saves the firm bid/offer spread on hedge product} and 
more subtle reasons {credit management, counterparty relationships, trading 
views,etc}.

Other "high potential" examples include: 

a.Commodity prepays (interest rate swap + credit wrapper + commodity swap). 
Conventional financing approach that may have application in Japanese 
marketplace, given difficulty that corporates can sometimes encounter raising 
funds through conventional banking channels due to bank liquidity constraints.

b.JGB locks (hedge preceding anticipated issuance, for example involving 
short-sale of JGBs and term reverse-financing)

c."Par Forward" F/X Swaps: Exchange of an uneven set of cashflows in currency 
a for currency b denominated cashflows at a fixed exchange rate.

d.Anticipatory exposure hedging: Options on Interest Rates and/or f/x on set 
exposures with an uncertain probability of occurrence. ( For example a bid 
submitted for an asset with cashflows subject to f/x exposure- if the bid is 
successful, exposure is certain, if bid is unsuccessful, exposure is zero.)


2.Trading Needs

ESSENTIAL: North America  maintains open exposures that will be monitored, 
rebalanced, adjusted for significant and market-moving changes during Asian 
time zone. Houston portfolio is comprised of equity, interest rate and forex 
positions. Equity index futures are an important part of Financial Trading 
strategy, albeit I understand that they fall into a more onerous regulatory 
framework.

IDEAL: Discretion over execution vehicle and timing of  execution {ie otc 
versus futures to take advantage of relative richness/cheapness in desired 
hedge vehicle, favorable financing, arbitrage}


Summary of "Indispensable" investment vehicles

a. Over the counter Libor indexed fixed-for-floating swap
b. Over the counter basis swaps (receive floating rate in one currency libor, 
pay floating rate in another with exchange of notional up front)
c. Spot foreign exchange
d. Forward foreign exchange is basically a combination of the above  three 
products
e. FRA's: basically decomposition of a swap into it's smallest components but 
enables more precise hedging
f.  Cash JGB's plus repo
g. Futures (JGB's) usually underlying is determined as the 
cheapest-to-deliver of a basket of deliverables based on implied financing to 
futures settlement. 
h. Options on all above products (OTC)

Others
Eventually, would entertain:
-Equity baskets, equity index derivatives, exchange traded-options


Please let me know if there are any other details I can provide to facilitate 
our research. 

Sincerely,
Darren