Re: Trip to Houston

Andy:
Good to hear. There continue to be a proliferation of new systems coming
online in the US; two more start in the next two months. We are pretty close
to finalizing a plan to open our system to everyone in terms of accepting
limit orders and posting best bid/offer regardless of whose it is. In this
framework, Enron would sleeve credit for free should two third parties be
matched on our system. However, we would hold the book, getting to see what
everyone was doing at all times. The idea is that if we can move the
industry's order flow from 30-40% EOL to 60% EOL, we get a huge information
advantage in addition to a couple trading advantages, namely we have first
priority on all numbers even if we are joining a limit bid posted by a
counterparty before us and second, we posess a proprietary stack manager that
will allow us to transact on attractive limit orders faster than our
competitors. Still working on technical issues. The decision to open EOL
markets would be done on a product by product basis. Give me a call if you
want to discuss.

Andrew Fairley
03/13/2001 11:14 AM
To: John Arnold/HOU/ECT@ECT
cc:
Subject: Re: Trip to Houston

John

Redmond & I have now had a few weeks to implement some of your advice with
regard to EOL for UK gas.
We have managed to double our average daily volumes, and are capturing a
considerably greater share of the market. (We estimate 50% now).
Spectron are getting about 20-30% of the number of trades we do. There are
still some counterparties who insist on paying through our numbers and paying
brokerage so they do not show us what we are doing! As far as we are
concerned we only use SpectronLive on UK gas when we are executing the
strategy you mentioned below.

Once again, thanks for your help
All the best,

Andy

John Arnold
21/02/2001 04:26
To: Andrew Fairley/LON/ECT@ECT
cc:

Subject: Re: Trip to Houston

Andy:
Enjoyed meeting with you.

One more thing I did not address. My ultimate goal is to move all volume to
EOL. However, in addition to the NYMEX, we have about 6 other viable
electronic trading systems. We make it a point to never support these if
possible. We will only trade if the other system's offer is at or greater
than our bid. For instance, if we are 6/8 but have a strong inclination to
buy and another system is at 7, I will simultaneously lift their 7's and move
my market to 7/9. The lesson the counterparty gets is he will only get the
trade if I'm bidding 7 and he will only get executed when it is a bad trade
to him. People have learned fairly quickly not to leave numbers on the other
systems because they will just get picked off. If they don't post numbers on
the other systems, the systems get no liquidity and die.

I mention this because I have heard that Enron is a fairly large trader on
Spectron's system. I don't know whether it is in regards to gas, power, or
metals. Just something to think about and maybe talk about with the other
traders.
John

Andrew Fairley
02/20/2001 11:15 AM
To: Phillip K Allen/HOU/ECT@ECT, John Arnold/HOU/ECT@ECT, Scott
Neal/HOU/ECT@ECT, Thomas A Martin/HOU/ECT@ECT, Barry Tycholiz/NA/Enron@ENRON,
Keith Holst/HOU/ECT@ect
cc: David Gallagher/LON/ECT@ECT
Subject: Trip to Houston

Thank you so much for your time last week.

David and I found the time especially valuable. We have spotted several
issues helpful for our own market.
This should certainly help in the growth of our markets here in Europe. We
trust it won't be too long before we see similarly impressive results from
our side of the pond.

Best regards

Andy