Justin/Mark - FYI re: CFTC developments + mentions the following co's:

- OnExchange
- EnergyClear
- TrueQuote (& EOL)

---------------------- Forwarded by Paul Goddard/EU/Enron on 19/01/2001 11:10 
---------------------------


djcustomclips@djinteractive.com on 19/01/2001 10:32:09
Please respond to nobody@mail1.djnr.com
To: 158586@mailman.enron.com
cc:  

Subject: EnronOnline: Online Energy Exchanges Spring Into Action Under New    
Regulations.(Commodity ...


Online Energy Exchanges Spring Into Action Under New
Regulations.(Commodity Futures Modernization Act, OnExchange Inc., True
Quote L.L.C.)(Brief Article)

01/04/2001
The Oil Daily
ITEM01004008
Copyright 2001 Gale Group. All rights reserved. COPYRIGHT 2001 Energy
Intelligence Group

  Online Energy Exchanges Spring Into Action Under New Regulations

  Electronic energy exchanges are moving quickly to take  advantage of
new US legislation that clarified rules for  regulating futures and
over-the-counter (OTC) markets.


  The reforms took effect late last month after the  legislation was
squeezed through Congress and signed by  outgoing President Clinton.

  One start-up company, Massachusetts-based OnExchange, says  it was the
first exchange to be registered under the new  legislation, having
applied to the regulatory Commodity  Futures Trading Commission (CFTC)
several months before.

  OnExchange will start by trading futures on financial  markets, but
also plans to act as a clearinghouse for  energy transactions. True
Quote, an electronic energy  exchange, has also received CFTC
clarification of its status under the new rules.

  The legislation comes at the end of a two-year drive to  reform
derivatives markets. But this long and twisted  process is not quite
over: The CFTC has withdrawn its own  set of similar reforms in order to
bring them into full compliance with the new law. The CFTC reforms had
been due  to take effect in mid-February; the agency said they will  be
revised "promptly."

  The legislation, the Commodity Futures Modernization Act,  was pushed
through Congress as part of an appropriations  bill, and signed into law
Dec. 21. It loosens the rules for  futures exchanges, gives OTC
contracts greater legal standing, and encourages the development of
electronic  trading platforms.

  As a result, energy traders should enjoy a greater choice  of products
and venues, while new exchanges will face lower  barriers of entry and
less regulation. But the changes also  point to a more complex energy
market, in the near term at  least, as well as greater challenges for
price discovery.

  The CFTC's revised proposals will include more detail, for  example,
on how exactly to apply for registration. They  also will adopt the
legislation's terminology, such as the  names of three new tiers of
futures exchanges.

  A top tier, called "designated contract markets," will  match current
futures markets such as the New York  Mercantile Exchange (Nymex), which
allow retail participation. A second rank, of "registered derivatives
transaction execution facilities," will be largely limited to
institutional trade, and will require looser regulation.  The third
tier, which escapes most regulation, will be known as "exempt boards of
trade."

  Energy platforms will not qualify for this last category.

  The CFTC also encourages the establishment of independent
clearinghouses - which act as a central counterparty to  reduce
financial risk - but these must register with the  agency.

  The legislation encourages online activity by limiting CFTC
jurisdiction over derivatives contracts for so-called  "exempt
commodities" - essentially, energy, and metals -  when traded on
electronic platforms.

  This clause, Section 106, applies when contracts are traded  between
experienced, institutional traders. It effectively  limits oversight to
requirements preventing fraud and  manipulation.

  Exchanges may be required to disseminate data on prices and  trading
volumes, if they have a significant influence on  the wider market.

  The reforms cover bilaterally traded instruments, with  multilateral
activities still in something of a gray area.  Basically, an electronic
exchange handling multilateral  trades of energy derivatives can apply
to the CFTC for  official status, if it thinks this will bring
credibility  and legal standing. However, a derivatives exchange that
does not register with the CFTC will not be pursued.

  OnExchange has been classified by the CFTC as both a  designated
contract market and a recognized clearing  organization. The firm
specializes in technology for  trading and clearing commodity and
financial derivatives.  It will start by trading futures contracts in US
 treasuries, but plans to expand.

  The firm recently agreed with another start-up,  EnergyClear, to
develop electronic clearing services for  the energy industry.
EnergyClear is a joint venture of the  Bank of New York and energy
brokers Amerex and Prebon  Yamane.

  True Quote, a Kentucky-based electronic platform  specializing in
physical and financial energy trade,  recently completed development of
its online platform. It  is now signing up users and plans to start
trading North American contracts for natural gas, electricity, and coal
in the first quarter. True Quote will also activate an  agreement with
Enron, connecting its system to the  EnronOnline platform.

  True Quote is looking to expand into European gas and power  this
year. Other products under review include carbon  emissions, weather
derivatives, and bandwidth. It is not  considering oil at the moment, a
spokeswoman said.

  David Pike



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