LCH.Clearnet and Nodal Exchange have signed an agreement to develop a trading and clearing service in North America, providing trading and clearing of cash settled financial nodal power contracts.
The service will form part of LCH.Clearnet’s program for new energy clearing going forward from 2008.
The launch, planned for autumn 2008, will provide a centralised auction-based exchange and clearing service for the expanding nodal marketplace in North America. LCH.Clearnet will provide central counterparty services to a screen-traded nodal auction market as well as OTC broker-matched trades, thus encompassing all areas of this marketplace.
Key features will include VaR margining methodology at LCH.Clearnet, along with a new engine at Nodal Exchange to deliver trade optimisation to market participants.
The service will initially cover trading at nodes across four market locations, namely PJM, NYISO, NE-ISO and MISO. Planned expansions include the markets in Texas, California, Southwest Power Pool and Canada. The service will give participants in these markets the ability to hedge their positions more precisely while also allowing them to minimize their counterparty risk and reduce their margin/collateral requirements.
“I am very pleased to announce this new collaboration with Nodal Exchange. LCH.Clearnet is the leading central counterparty in energy clearing, and this extension into nodal power contracts underscores our determination to expand our clearing reach across new energy and power asset classes. It also represents the first example of our new energy clearing program. In collaborating with Nodal Exchange, we are working with one of the key new markets and firmly believe this will be of great benefit to our power and energy-focused members,” says Roger Liddell, CEO, LCH.Clearnet.
“The real-time markets in place today have demonstrated the value of nodal auctions towards ensuring system reliability and price transparency. Nodal Exchange is intent on expanding that nodal market by adding forward contracts that are in great demand. Our LCH.Clearnet collaboration allows us to provide central counterparty clearing to forward contracts, simplifying hedging and reducing risk. This, combined with the liquidity and price efficiency provided by the Nodal Exchange auction, will deliver huge benefits to industry participants and consumers alike. LCH.Clearnet’s experience and commitment to power market development makes them a natural partner,” adds Audrey Zibelman, CEO, Nodal Exchange.