global markets limits the enron bod approved the following limit changes for global markets today ,
effective for trading day tuesday , february 13 , 2001 . a separate e - mail was
sent to each of your head traders and business unit controllers / cao for each
of these commodity groups with limit changes .
new limits existing limits
equity trading
net open position limit $ 200 mm $ 100 mm
maturity / gap limit n / a n / a
var limit $ 10 mm $ 6 mm
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 was
transferred to enron europe and combined with credit trading in december
2000 ; new limits requested to establish separate commodity group in global
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 ( < = 2 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 .
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 30 mm 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
maturity / gap limit 3 mm bbl 12 - month
var limit $ 3 mm ( included in global products $ 15 mm var )
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
your individual commodity limits may become sub - limits subject to a larger
combined limit ( for example , 1 ) combine equity , convertible arbitrage , and
financial instruments ' i / r and f / x , 2 ) combine softs , grains , and meats , and
potentially other newer businesses as well ) . we will work with you as these
higher level limits are being developed .
note 2 : cross - commodity trading authority was not pre - approved for anyone in
the company . authority to trade a commodity for which you are not the
authorized trader must be obtained from the business unit office of the
chairman for the commodity group that is authorized to trade that commodity ,
with appropriate reporting as noted below .
policy amendments were as follows :
u clarify the cross - commodity trading policy to specify that trading limits
are to be applied against enron  , s consolidated commodity positions on an
individual commodity group basis ; enron  , s consolidated daily position report
should provide required market risk disclosures by primary commodity group ;
( for example , enron  , s exposure to the north american natural gas market shall
be aggregated across the company ) .
 ) delegate cross - commodity trading approval among established commodity
groups to the respective business units offices of the chairman , with
appropriate reporting to the enron corp . chief risk officer .
u specify the operational control requirement that all trades executed over
the telephone must be recorded electronically .
below are relevant excerpts from the revised policy addressing the
cross - commodity trading guidelines . i will distribute the entire updated
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  , s consolidated
trading results , enron  , s consolidated daily position report should include
the net open position , maturity / gap position , profit or loss , and potential
exposure ( var ) for approved commodity groups consolidated across the company
without regard to which business unit undertook the trading activity . in
those instances where limits are granted to a business unit for a basket of
commodities , reporting for individual commodity risk books shall be
maintained to facilitate aggregation of enron  , s actual consolidated commodity
specific exposure . management reporting may separately provide business unit
sub - limit monitoring and trading results aggregated according to management
lines . "
e . transaction approval and execution . " only those employees designated by
the enron corp . chief risk officer or his designee ( s ) will be authorized to
enter into transactions on behalf of enron . the chief risk officer must also
maintain a record of those employees responsible for the individual commodity
groups ( commodity group manager ) as specified in the appendices . individuals
will be assigned as commodity leaders to manage enron  , s aggregate position
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 its
business an enron business unit or trading desk incurs an exposure to an
underlying commodity or financial instrument for which it does not have
explicit authority to carry , this exposure should be hedged internally with
the appropriate enron desk ( s ) , with appropriate notification to the chief
risk officer or his designee ( s ) . hedge positions should be in instruments
that have an observable correlation with the underlying exposure , and should
be rebalanced regularly to substantially neutralize the underlying exposure .
upon notification to the chief risk officer or his designee ( s ) , the enron
business unit office of the chairman who has authority for that commodity
group may authorize a specific trader in a different commodity group to take
speculative positions with other enron trading desks in commodities and / or
financial instruments other than those which that trader has explicit
authority to trade ( i . e . the business unit office of the chairman for north
american natural gas may authorize a trader in the coal group to trade gas
with the north american natural gas desk ) . for limit monitoring purposes
of enron  , s consolidated trading results , these cross - commodity positions
shall be captured by individual commodity to facilitate aggregation and
reporting of enron  , s consolidated exposure by commodity in the daily position
report ( coal desk  , s gas position will be aggregated with the north american
natural gas commodity group . )
if you have any questions , feel free to call bjorn hagelman at x 57984 , me at
x 30429 , or david port at x 39823 .
regards ,
cassandra schultz .
global markets limits
the enron bod approved the following limit changes for global markets today ,
effective for trading day tuesday , february 13 , 2001 . a separate e - mail was
sent to each of your head traders and business unit controllers / cao for each
of these commodity groups with limit changes .
new limits existing limits
equity trading
net open position limit $ 200 mm $ 100 mm
maturity / gap limit n / a n / a
var limit $ 10 mm $ 6 mm
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 was
transferred to enron europe and combined with credit trading in december
2000 ; new limits requested to establish separate commodity group in global
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 ( < = 2 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 .
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 30 mm 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
maturity / gap limit 3 mm bbl 12 - month
var limit $ 3 mm ( included in global products $ 15 mm var )
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
your individual commodity limits may become sub - limits subject to a larger
combined limit ( for example , 1 ) combine equity , convertible arbitrage , and
financial instruments ' i / r and f / x , 2 ) combine softs , grains , and meats , and
potentially other newer businesses as well ) . we will work with you as these
higher level limits are being developed .
note 2 : cross - commodity trading authority was not pre - approved for anyone in
the company . authority to trade a commodity for which you are not the
authorized trader must be obtained from the business unit office of the
chairman for the commodity group that is authorized to trade that commodity ,
with appropriate reporting as noted below .
policy amendments were as follows :
u clarify the cross - commodity trading policy to specify that trading limits
are to be applied against enron  , s consolidated commodity positions on an
individual commodity group basis ; enron  , s consolidated daily position report
should provide required market risk disclosures by primary commodity group ;
( for example , enron  , s exposure to the north american natural gas market shall
be aggregated across the company ) .
 ) delegate cross - commodity trading approval among established commodity
groups to the respective business units offices of the chairman , with
appropriate reporting to the enron corp . chief risk officer .
u specify the operational control requirement that all trades executed over
the telephone must be recorded electronically .
below are relevant excerpts from the revised policy addressing the
cross - commodity trading guidelines . i will distribute the entire updated
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  , s consolidated
trading results , enron  , s consolidated daily position report should include
the net open position , maturity / gap position , profit or loss , and potential
exposure ( var ) for approved commodity groups consolidated across the company
without regard to which business unit undertook the trading activity . in
those instances where limits are granted to a business unit for a basket of
commodities , reporting for individual commodity risk books shall be
maintained to facilitate aggregation of enron  , s actual consolidated commodity
specific exposure . management reporting may separately provide business unit
sub - limit monitoring and trading results aggregated according to management
lines . "
e . transaction approval and execution . " only those employees designated by
the enron corp . chief risk officer or his designee ( s ) will be authorized to
enter into transactions on behalf of enron . the chief risk officer must also
maintain a record of those employees responsible for the individual commodity
groups ( commodity group manager ) as specified in the appendices . individuals
will be assigned as commodity leaders to manage enron  , s aggregate position
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 its
business an enron business unit or trading desk incurs an exposure to an
underlying commodity or financial instrument for which it does not have
explicit authority to carry , this exposure should be hedged internally with
the appropriate enron desk ( s ) , with appropriate notification to the chief
risk officer or his designee ( s ) . hedge positions should be in instruments
that have an observable correlation with the underlying exposure , and should
be rebalanced regularly to substantially neutralize the underlying exposure .
upon notification to the chief risk officer or his designee ( s ) , the enron
business unit office of the chairman who has authority for that commodity
group may authorize a specific trader in a different commodity group to take
speculative positions with other enron trading desks in commodities and / or
financial instruments other than those which that trader has explicit
authority to trade ( i . e . the business unit office of the chairman for north
american natural gas may authorize a trader in the coal group to trade gas
with the north american natural gas desk ) . for limit monitoring purposes
of enron  , s consolidated trading results , these cross - commodity positions
shall be captured by individual commodity to facilitate aggregation and
reporting of enron  , s consolidated exposure by commodity in the daily position
report ( coal desk  , s gas position will be aggregated with the north american
natural gas commodity group . )
if you have any questions , feel free to call bjorn hagelman at x 57984 , me at
x 30429 , or david port at x 39823 .
regards ,
cassandra schultz .