LCH.Clearnet is introducing tiered margining on power and energy derivatives spreads to drive further efficiencies and release substantial capital back to the market, says the company.
The following contracts will benefit from tiered margining for both inter-month spreads and inter-commodity offsets for Brent futures, WTI and GAS Oil, Henry Hub, SP15 and PJM West US Power contracts. The new tiered margining was introduced on 20 March, 2007.
“Our aim is to maintain the highest levels of integrity in risk management and margining while prudently recognising correlations both within and between contracts,” says Roger Liddell, LCH.Clearnet Group CEO. “In this instance we have made improvements to our risk management tools to recognise and manage margin reductions in our energy portfolio, and this means substantial savings on initial margin requirements to our clearing community.”