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Enron Mail |
Mark the position is relatively straight forward. Enron Australia Finance
Pty.Ltd.(EAF) trades Australian Power Derivatives under what is known as an exempt market declaration (safe harbour provision). There are a number of requirements to be met under this Declaration including a list "qualifications" of the persons who can enter into a transaction. The only qualification likely to apply to a non- Australian resident is if a party registered under the Declaration (such as EAF) reasonably believes that the entity has tangible assets with a market value of at least AUD10M (USD6M). What happens if we contract with someone who does not have this asset level and none of the other tests apply? In all likelihood nothing. However, the Australian Regulator (ASIC) would expect EAF to have procedures in place aimed at compliance with the provisions of the Declaration. We are required to report annually on these procedures. We are also currently in discussions with ASIC aimed at extending our Declaration to all products traded through EOL in Australia. This is to ensure we are prepared should legislative changes eventuate next year requiring trading in all derivatives to be licenced. Any suggestion that we do not have procedures in place to ensure compliance with the intent of our current declaration would be of extreme concern to ASIC. They placed particular emphasis on our assurances that we are not going to be entering the "retail" market and will have procedures to ensure this occurs. In essence what am saying is that we need to be able to point to procedures to show we are taking reasonable steps to ensure that our counterparties meet the qualifications to trade power derivatives. My concern is not with Australian companies - there are a number of tests that apply to them apart from just asset level. Also we can handle them from here.But when a company appears on Tana's list that is say incorporated in the US and does not trade in Australia there seems no way of checking unless some assessment is made of its asset level. I thought this was being done as per procedures developed (see procedures attached to following email). Rather than bounce emails between us can we arrange a brief phone discussion on this point? From: Mark Taylor@ECT on 18-08-2000 11:25 CDT To: David Minns/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT cc: Tana Jones/HOU/ECT@ECT Subject: EnronOnline access to Australian Power products Thanks for dealing with Tana on these issues. It is not entirely clear to me what you want the policy to be regarding which counterparties have access to Australian power products. You probably already know that the EnronOnline people want every counterparty everywhere in the world to have access to every product unless Credit or Legal can justify restricting their access. Credit already performs a financial test on each counterparty to determine if they meet the CFTC Eligible Swap Participant requirements. Unfortunately, that test is not as restrictive as the Australian tangible assets test. It sounds like there should be a US$6 million tangible assets test applied by Credit before we give any counterparty access to Australian Power (this would be a total pain but certainly possible). On the other hand, if you feel comfortable giving access to non-Australian counterparties without that test being performed, we can do that, too. Pleas let me know if we should ask Credit to start performing this test on all counterparties or if it should be limited to Australian entities.
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