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Enron Mail |
The Enron BOD approved the following limit changes for Global Markets today=
,=20 effective for trading day Tuesday, February 13, 2001. A separate e-mail wa= s=20 sent to each of your head traders and business unit controllers/CAO for eac= h=20 of these commodity groups with limit changes. =20 New Limits Existing Limits Equity Trading Net Open Position Limit $200 MM $100 MM=20 Maturity / Gap Limit N/A N/A VaR Limit $10 MM $6 MM=20 Convertible Arbitrage Net Open Position Limit $150 MM ***** Maturity / Gap Limit N/A ***** VaR Limit $2 MM ***** ***** This product was included in the Debt trading commodity group that w= as=20 transferred to Enron Europe and combined with Credit trading in December=20 2000; new limits requested to establish separate commodity group in Global= =20 Markets in 2001 Financial Instruments Foreign Currency: Net Open Position Limit $150 MM $100 MM Maturity / Gap Limit N/A N/A Interest Rate: Net Open Position Limit $250,000/bp $100,000/bp Maturity / Gap Limit N/A $ 50,000/bp(<=3D2 yrs) VaR Limit $5 MM (Combined) $3 MM (Combined) Soft Commodities Net Open Position Limit 4,000 Contracts 2,000 Contracts Maturity / Gap Limit N/A 2,000 Contracts VaR Limit $2 MM $0.75 MM Grains Net Open Position Limit 750 Contracts 1,000 Contracts Maturity / Gap Limit N/A 1,000 Contracts VaR Limit $0.5 MM $0.5 MM Meats (formerly called Livestock) Net Open Position Limit 750 Contracts 1,000 Contracts Maturity / Gap Limit N/A 1,000 Contracts VaR Limit $0.5 MM $0.75 MM Weather Derivatives Net Open Position Limit 40,000 EOL Equiv. Contracts 30,000 EOL Equiv.=20 Contracts ** Maturity / Gap Limit N/A N/A VaR Limit $4.5 MM $3 MM ** $100 MM notional value Coal and Freight Net Open Position Limit 30 MM MT 15 MM MT Maturity / Gap Limit 30MM MT 12-month 15 MM MT 12-month VaR Limit $7 MM *** $4 MM *** *** Freight limited to $2 MM VaR (no change) Global Products Net Open Position Limit 18 MM Bbl 12.5 MM Bbl Maturity / Gap Limit 19 MM Bbl 12-month 15 MM Bbl VaR Limit $15 MM $8 MM EOL Crude - Sub-limit of Global Products Net Open Position Limit 2 MM Bbl =20 Maturity / Gap Limit 3 MM Bbl 12-month=20 VaR Limit $3 MM (included in Global Products $15MM VaR)=20 LNG Net Open Position Limit 9 Bcf None Maturity / Gap Limit 12 Bcf 12-month None VaR Limit $5 MM None Note 1: The BOD directed us to combine some limits for some businesses, so= =20 your individual commodity limits may become sub-limits subject to a larger= =20 combined limit (for example, 1) combine equity, convertible arbitrage, and= =20 financial instruments' i/r and f/x, 2) combine Softs, Grains, and Meats, an= d=20 potentially other newer businesses as well). We will work with you as thes= e=20 higher level limits are being developed. Note 2: Cross-commodity trading authority was not pre-approved for anyone = in=20 the company. Authority to trade a commodity for which you are not the=20 authorized trader must be obtained from the Business Unit Office of the=20 Chairman for the commodity group that is authorized to trade that commodity= ,=20 with appropriate reporting as noted below. Policy amendments were as follows: u Clarify the cross-commodity trading policy to specify that trading limits= =20 are to be applied against Enron=01,s consolidated commodity positions on an= =20 individual commodity group basis; Enron=01,s consolidated Daily Position R= eport=20 should provide required market risk disclosures by primary commodity group;= =20 (for example, Enron=01,s exposure to the North American Natural Gas market = shall=20 be aggregated across the company). =01) Delegate cross-commodity trading approval among established commodity= =20 groups to the respective Business Units Offices of the Chairman, with=20 appropriate reporting to the Enron Corp. Chief Risk Officer. u Specify the operational control requirement that all trades executed over= =20 the telephone must be recorded electronically. Below are relevant excerpts from the revised policy addressing the=20 cross-commodity trading guidelines. I will distribute the entire updated= =20 policy as soon as we incorporate the BOD's comments. V. Operations and Controls. B. Position Reporting. "...For purposes of limit monitoring and aggregation of Enron=01,s consolid= ated=20 trading results, Enron=01,s consolidated Daily Position Report should inclu= de=20 the Net Open Position, Maturity/Gap Position, profit or loss, and potential= =20 exposure (VaR) for approved Commodity Groups consolidated across the compan= y=20 without regard to which business unit undertook the trading activity. In=20 those instances where limits are granted to a business unit for a basket of= =20 commodities, reporting for individual commodity risk books shall be=20 maintained to facilitate aggregation of Enron=01,s actual consolidated comm= odity=20 specific exposure. Management reporting may separately provide business un= it=20 sub-limit monitoring and trading results aggregated according to management= =20 lines." E. Transaction Approval and Execution. "Only those employees designated by= =20 the Enron Corp. Chief Risk Officer or his designee(s) will be authorized to= =20 enter into Transactions on behalf of Enron. The Chief Risk Officer must al= so=20 maintain a record of those employees responsible for the individual Commodi= ty=20 Groups (Commodity Group Manager) as specified in the Appendices. Individua= ls=20 will be assigned as commodity leaders to manage Enron=01,s aggregate positi= on=20 across the company as determined necessary by the Chief Risk Officer..." VI. Policy Amendment Authority B. Cross-Commodity Position Authorization. If in the ordinary course of it= s=20 business an Enron Business Unit or trading desk incurs an exposure to an=20 underlying commodity or financial instrument for which it does not have=20 explicit authority to carry, this exposure should be hedged internally with= =20 the appropriate Enron desk(s), with appropriate notification to the Chief= =20 Risk Officer or his designee(s). Hedge positions should be in instruments= =20 that have an observable correlation with the underlying exposure, and shoul= d=20 be rebalanced regularly to substantially neutralize the underlying exposure= . =20 Upon notification to the Chief Risk Officer or his designee(s), the Enron= =20 Business Unit Office of the Chairman who has authority for that commodity= =20 group may authorize a specific trader in a different commodity group to tak= e=20 speculative positions with other Enron trading desks in commodities and/or= =20 financial instruments other than those which that trader has explicit=20 authority to trade (i.e. the Business Unit Office of the Chairman for North= =20 American Natural Gas may authorize a trader in the Coal group to trade gas= =20 with the North American Natural Gas desk). For limit monitoring purposes= =20 of Enron=01,s consolidated trading results, these cross-commodity positions= =20 shall be captured by individual commodity to facilitate aggregation and=20 reporting of Enron=01,s consolidated exposure by commodity in the Daily Pos= ition=20 Report (Coal desk=01,s gas position will be aggregated with the North Ameri= can=20 Natural Gas commodity group.) If you have any questions, feel free to call Bjorn Hagelman at x57984, me a= t=20 x30429, or David Port at x39823. Regards, Cassandra Schultz.
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