Rick:   

As background to this meeting, I wanted to provide you  with my understanding 
of the CFTC's current regulations:

Because EOL is a "bilateral" trading platform (one-to-many), the platform is 
currently exempt from CFTC regulation, with the exception of the CFTC's 
anti-fraud and anti-manipulation laws.   

With the passage of the CFMA, energy derivatives are exempt from CFTC 
regulation, except for certain minimum requirements.   While the CFTC can no 
longer dictate how we structure energy swaps, we can only do business with 
"eligible contract (or swap) participants."   Eligible contract/swap 
participants must meet a net worth test of $1m (for business entities).  The 
same net worth test applies to energy options (the CFMA eliminated the 
"physical handling" requirement, which required participants to be in the 
physical business before entering into energy option transactions).   

In my non-legal opinion, the CFTC has jurisdiction over EOL as a bilateral 
trading platform, and over financial transactions (whether or not they are 
transacted through EOL, over the phone, etc.).   This jurisdiction would be 
limited as discussed above.      

Thanks.

Lisa




	James D Steffes
	06/06/2001 05:45 PM
		 
		 To: Steven J Kean/NA/Enron@Enron, Richard Shapiro/NA/Enron@Enron, Mark E 
Haedicke/HOU/ECT@ECT, Mark Taylor/HOU/ECT@ECT, Lisa Yoho/NA/Enron@Enron, 
Sarah Novosel/Corp/Enron@ENRON, Linda Robertson/NA/Enron@ENRON, Christi L 
Nicolay/HOU/ECT@ECT
		 cc: 
		 Subject: EOL Regulation - CFTC or FERC?

As you are all probably aware, FERC staff will be conducting a visit to Enron 
next Monday to discuss EOL and electronic trading's role in the energy 
markets.   Dave Forester, Kevin Presto, and Phillip Allen will be giving 
presentations about the EOL platform, power trading, and gas trading, 
respectively.

In preparing for the meetings, the issue of which agency, CFTC or FERC, 
regulates the EOL platform and any energy related financial products sold by 
Enron (everyone agreed that physical deals through EOL were FERC 
jurisdictional) came up.

It is unclear about Enron's current position.  While there is a strong case 
that both the EOL platform and any energy related financial products are 
regulated by the CFTC, some people believed that Enron had previously 
informed FERC that they were the "appropriate" agency for the energy related 
financial products.

We do not intend to make an issue of this topic with the FERC staff on 
Monday, but rather wanted to make sure that everyone was on the same page 
going forward.

Please let me know if we need to have a meeting to bring this to closure.

Jim