Subject: Block Forward Financial Trades
From: [email-masked]
To: [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked]
Cc: [email-masked]
Date: Tue, 25 Jul 2000 08:14:00 -0700 (PDT)

Legal has been assessing the risks of doing block forward trades as financial 
and for now, subject to future changes that may be required  as discussions 
with the CAPX legal experts continue,  we can state the basic rules as 
follows:

It is okay to do up to 50% of  our Block Forward business as financial.
It is very important to monitor this 50% level very closely and we should not 
exceed it. We should not rely on the PX to tell us what the level is. We 
should confirm it ourselves.  A skeptical regulator, looking at PX records 
should never be able to see that we ever did more than half our block forward 
business as financial.  
One of the legal rules that we must comply with in this area is that there 
must be a bona fide commercial reason for going financial.  This 
dumbfoundingly simple sounding rule is important.  Somehow, when we 
communicate our decision to the PX to go from physical to financial, we 
should give our reason.  I'm not sure whether our decision is expressed by 
phone, or electronically, but in either case,  the person making the change 
with the PX should get in an expression something like this:  "we would like 
to change these trades to financial because we think the elimination of 
physical risk will benefit us commercially."  Please be patient with this 
self serving requirement and do it. 

 I have not worked out with any of the other back office groups how this new 
practice will be handled. Obviously any changes it will require in 
scheduling, settlements and accounting need to be dealt with too. Please call 
me with any questions.  ----cgy