Congress Passes the Commodity Futures Modernization Act of 2000

Late Friday afternoon, December 15, Congress passed the Commodity Futures 
Modernization Act of 2000.  The purpose of the Act is to eliminate 
unnecessary regulation of commodity futures exchanges and other entities 
falling within the  coverage of the Commodities Exchange Act ("CEA") and the 
provide legal certainty with regard to certain futures and derivatives 
transactions.  By enacting such changes, Congress intends to promote product 
innovation and to enhance the competitive position of US financial markets. 
Certain provisions of the Act open the door for Enron's further product 
innovation and growth.  Specifically, the Act provides important legal 
certainty for energy and other transactions occuring both on an 
over-the-counter (OTC) bilateral basis and on multilateral electronic trading 
platforms.  Enron was a leading advocate of passage of this legislation.

Bilateral Transactions

Under the Act, bilateral transactions in all commodities (other than 
agriculture commodities) that do not occur on trading facility (i.e. not on a 
multi-party exchange) are exempt from most provisions of the CEA as long as 
the transactions are entered solely between "eligible contract 
participants"(i.e. persons and certain legal entities satisfying capital 
thresholds and other requirements under the Act).  This provision essentially 
codifies and expands existing CFTC exemptions for swaps and forward 
contracts, thereby eliminating a degree of legal ambiguity that has 
frustrated product innovation and growth.  

Multilateral Transactions

In addition, the Act creates a broad exemption for any agreement, contract or 
transaction in commodities (other than agriculture commodities) so long as 
they the transactions are between "eligible commercial participants", are 
entered into on a "principle-to-principle basis" and that take place on a 
multi-party "electronic facility".  This exemption could facilitate expansion 
of EnronOnline to allow for multi-party transactions, however certain legal 
requirements will have to be met.

Other Transactions

The Act also creates a broad exclusion for a number of commodities that are 
of interest to Enron, including "credit risk measure" commodities and weather 
derivatives .  Again, the derivative transaction exclusion will have to meet 
certain legal thresholds.

This legislation has been over six years in the making and the collective 
support of many Enron employees has been crucial.  Thank you to all that have 
contributed to the passage on this important legislation.  We will have a 
more through legal summary of this legislation in the near future. Do not 
hesitate to contact me at (202) 466- 9158 of Mark Taylor at (713) 853-7459 
with any questions.