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The Enron loophole has been closed and goes into effect on Sept 30, 2009 [View All]

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LSK Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jun-19-08 10:04 AM
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The Enron loophole has been closed and goes into effect on Sept 30, 2009
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Edited on Thu Jun-19-08 10:55 AM by LSK
The Commodity Futures Modernization Act of 2000 or CFMA (Public Law 106554, 1(a)(5) , December 21, 2000, 114 Stat. 2763, 2763A365, 7 U.S.C. 1), was passed by the United States Congress and signed by President Bill Clinton in December 2000 in large part to allow for the creation of U.S. exchanges for the listing of a new sort of derivative security, the single-stock future.

The "Enron Loophole"

The CFMA has received criticism for the so-called "Enron Loophole," 7 U.S.C. 2(h)(3) and (g), which exempts most over-the-counter energy trades and trading on electronic energy commodity markets. The "loophole" was drafted by Enron Lobbyists working with senator Phil Gramm <1> seeking a deregulated atmosphere for their new experiment, "Enron On-line".

The prohibition on single-stock futures and narrow-based indices that had been in effect until the passage of this act was known as the Shad-Johnson Accord because it was first announced in 1982, as part of a jurisdictional pact between John S.R. Shad, then chairman of the U.S. Securities and Exchange Commission and Phil Johnson, then chairman of the Commodity Futures Trading Commission.

http://en.wikipedia.org/wiki/Enron_loophole




The Enron loophole fix has been included in the Farm Bill HR 2419: Farm, Nutrition, and Bioenergy Act which on May 22 was passed on a Veto override:
http://clerk.house.gov/evs/2008/roll315.xml and http://www.senate.gov/legislative/LIS/roll_call_lists/r...

SEC. 13106. PORTFOLIO MARGINING AND SECURITY INDEX ISSUES.

(a) The Secretary of the Treasury, the Chairman of the Board of Governors of the Federal Reserve System, the Chairman of the Securities and Exchange Commission, and the Chairman of the Commodity Futures Trading Commission shall work to ensure that the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), or both, as appropriate, have taken the actions required under subsection (b).

(b) The SEC, the CFTC, or both, as appropriate, shall take action under their existing authorities to permit--

(1) by September 30, 2009, risk-based portfolio margining for security options and security futures products (as defined in section 1a(32) of the Commodity Exchange Act); and

(2) by June 30, 2009, the trading of futures on certain security indexes by resolving issues related to foreign security indexes.



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