Subject: Prediction Company
From: [email-masked]
To: [email-masked]
Cc: [email-masked], [email-masked]
Date: Fri, 3 Aug 2001 10:35:20 -0700 (PDT)

Greg,

A short summary of the proposed modes of cooperation with Prediction Company.
More detailed notes by Steve are attached.

I. Major potential projects (in the order they suggested it).

	1. Prediction Company develops a P&L attribution system (allocation of P&L to different market
	factors, like spreads, volume, trader's skills, etc.). Trader's performance evaluation system.

	2. Decision support system: a model recommending transactions to a trader without
	full trade automation.

	3. Fully automated trading system, setting prices and executing trades on an electronic trading platform.

	Any project would require review of the market data provided by Enron.  (Is it a  free option for them? -  VK)
 
II. Financial arrangements. Combination of a number of different forms of equity participation, direct payments 
   per project, and   fees per transaction.

	1. Equity investment would reduce fees and payments. For Prediction Company, this is a preferred form of 
	    Enron's participation.

	2. Payment per project that would look like consulting fees. They would like a lump-sum payment
	    first (to expand the staff), followed by consulting fees later. 

	3. Next to equity investment, they would like to see a constant income stream through
	    fees charged per transaction. My comment: in case they design a decision support
	    tool, it will be difficult to come up with a per transaction fee. It will be difficult to identify
	    decisions that can be attributed exclusively to their system.

Recommendations:

	1. A visit to Santa Fe with Kevin Garland to discuss an equity investment.

	2. I shall try to dig up more information about the company and the relationship
                with UBS.

	3. We should  come up with a solution that will help to transfer skills to Enron from
	    Prediction Company.

	Vince