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International Businesses

This article discusses the risk books and transactions in various financial markets including equities, bonds, FX, interest, and more for international businesses. It covers the pre and post-2000 scenarios, regulatory issues, and business changes.

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International Businesses

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  1. International Businesses • Weather • Pulp • FX • Interest • Equities • Bonds • Softs • Metals • Global Liquids • Coal • Credit derivatives • North American Gas and Power • European Gas and Power

  2. Weather • Pre 2000 • Houston risk book, London originators • European transactions booked in ECTRIC through EEFT • with back to back to ENA • Services agreement between ECTRIC and EEFT (cost + 5%) • Post 2000 • Main risk book in Houston, small risk books in Oslo and • Sydney, London origination • Oslo originated transactions booked in ECTRIC Norway • branch with back to back to ENA [check] • London originated transactions booked in ECTRIC through • EEFT with back to back to ENA • Sydney originations [check] • Services agreement between ECTRIC and EEFT for London • origination activity (cost + 10%) and [Sydney] • Review of business changes quarterly

  3. Pulp • Pre 2000 • Houston risk book, London originators • London originated financial transactions booked in ECTRIC • through EEFT with back to back to ENA • Services agreement between ECTRIC and EEFT (cost + 5%) • Post 2000 • Main risk book in Houston, small risk book in London, plus • origination • London originated financial transactions booked in ECTRIC • through EEFT with back to back to ENA • Services agreement between ECTRIC and EEFT for London • origination activity (cost + 10%) • Review of business changes quarterly

  4. FX [interest] • Pre 2000 • Houston risk book, London and Sydney originators • London originated transactions booked in ENA through agent • EEFT. Sydney originated transactions booked in ENA through • agent Enron Australia Finance Pty Ltd (“EAFPL”) • Services agreement between ENA and EEFT, and ENA and • EAFPL (cost + 5%) • Post 2000 • Main risk book in Houston, possibly small risk books in London • and Tokyo (relocated from Sydney) • London originated transactions booked in ENA through agent • EEFT. Sydney originated transactions booked in ENA through • agent Enron Australia Finance Pty Ltd (“EAFPL”) • Services agreement between ENA and EEFT for London • origination activity and ENA and EAFPL (cost + 10%) • Review of business changes quarterly

  5. Equities and bonds • Pre 2000 • No transactions executed outside of the US • Equities and bonds books in ECT Investments Inc • Post 2000 • Structure for London based bonds and equities business is • currently under discussion • Separate risk books for Houston and London, some trades • expected between the books • * Agent v CFC acting as principal • * Regulatory issues

  6. Softs • Post 2000 • Proprietary softs business in Houston • Former Rudolf Wolff softs business in London conducts • brokerage and financing business – future development of • the business under commercial review (proprietary trading • out of London ?) • * Regulatory issues

  7. Metals • Post 2000 • Financial – risk book in London (MGL). Agents in NY and • Tokyo enter into trades on behalf of MGL. Book is passed. • Compensation by way of commission. • Physical – risk book in London (MG MCC Ltd). Agents in NY • and Montreal enter into trades on behalf of MG MCC Ltd. • Compensation by way of commission. • Copper concentrates – risk book in NY (MG MCC Corp). • Business changes expected • * brokerage • * financing business • * proprietary trading • * Regulatory issues

  8. Global Liquids • Pre and Post 2000 • Separate risk books for • * Houston • * London • * Singapore • * Global Arb books • Financial and Physical transactions booked to the same • product risk book eg. London Gasoil • Regulatory issues • * EEFT agency compensated by commission agreement • Business changes – move to global books ?

  9. Coal • Pre 2000 • Separate risk books for Physical coal • * Houston – N America • * London – rest of world • Origination in Australia and India, compensated by • commission agreement • Post 2000 • London - Creation of European coal future market via EOL • London - Creation of Physical (ECSL) and Financial • (ECTRIC) freight risk books • London - creation of new desk for transportation of domestic • coal (rail freight, port throughput) • Australia - separate risk book for Australian originated • transactions • Regulatory issues

  10. Credit derivatives • Post 2000 • Single risk book in London (EnronCredit.com Ltd) • Trades involving the support of the Houston based personnel • booked in ENA and backed into EnronCredit.com Ltd • * ENA compensated under services agreement • Regulatory issues in Europe

  11. North American Gas and Power • Pre and Post 2000 • Separate risk books in US (ENA) and Canada (ECT Canada • Inc) • Trades between the risk books

  12. European Gas and Power • Pre and Post 2000 • Separate risk books • * Physical UK (ECTRL) • * Financial UK (ECTRI/EEFT) • * Continental Physical (ECTRL) • * Continental Financial (ECTRI/EEFT) • * Scandinavian Physical and Financial (ECTRIC Norway) • Trades between the risk books • Regulatory issues • Centralised management of risk in London (except Norway) • with European origination • * hub and spoke • * origination compensated on cost plus

  13. Transfer pricing approach • Tax Dept.’s response to Global books • APA • Services agreements versus trading profit allocation • Effective coordination • Recent tax developments

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