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Enron Mail |
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.
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