LCH.Clearnet Enters North American Power Market With Nodal Exchange

LCH.Clearnet Ltd (LCH.Clearnet) and Nodal Exchange launched a new service to provide trading and clearing of cash settled financial nodal power contracts in North America. For the first time, industry participants will benefit from the ability to more precisely hedge

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LCH.Clearnet Ltd (LCH.Clearnet) and Nodal Exchange launched a new service to provide trading and clearing of cash settled financial nodal power contracts in North America.

For the first time, industry participants will benefit from the ability to more precisely hedge their positions by trading the Locational Marginal Price (LMP) of power at granular nodes (locations within the organised power markets) while also allowing them to minimise their counterparty risk.

LCH.Clearnet will provide clearing services to all areas of the marketplace; both a nodal auction market and an over-the-counter (OTC) trade submission facility for negotiated transactions.

The new initiative will offer significant benefits to market participants, including:

Trade Optimisation – Value-at-Risk (VaR) margining methodology at LCH.Clearnet and a new auction engine at Nodal Exchange will combine to deliver trade optimisation.

Risk Management – Participants enjoy the ability to hedge their positions more precisely, while minimising their counterparty risk and reducing their margin/collateral requirements.

Transparency and Liquidity – Nodal Exchange auction and broker platforms will generate the transparency and transaction liquidity needed in the North American power markets.

The service will initially cover trading at nodes across four market locations ISO-NE (ISO New England), NYISO (New York ISO), PJM (PJM Interconnection), and MISO Midwest Independent Transmission System Operator) and will expand to cover additional markets as they develop nodal price histories including CAISO (California ISO) and ERCOT (Electric Reliability Council of Texas).

Once again we have delivered an innovative clearing solution to a new market, says Roger Liddell, chief executive, LCH.Clearnet. We are delighted to be working with Nodal Exchange on a unique approach that will bring efficiency and security to the expanding nodal marketplace in North America.

We are excited that trading has commenced and we very much look forward to growing the exchange, says Paul Cusenza, chief executive officer, Nodal Exchange. We believe Nodal Exchange with LCH.Clearnet clearing fills an unmet market need. Participants should now be better able to meet their trading objectives and more effectively manage their basis and credit risk.

L.D.

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