Nodal Exchange and LCH.Clearnet Ltd launch natural gas contract for Henry Hub

WASHINGTON and LONDON, October 28, 2010

Nodal Exchange, LLC and LCH.Clearnet Ltd (LCH.Clearnet) have today launched trading and clearing for a Henry Hub natural gas contract. 
 
The contract allows Nodal Exchange participants to enhance capital efficiency by cross-margining their power and natural gas portfolios using Value-at-Risk (VaR) margining.  The Henry Hub natural gas contract is available through Nodal Exchange’s cleared over-the-counter (OTC) trade platform.

The Henry Hub contract has a monthly term with a lot size of 2,500 MMBtu per month. Contract expiries extend from the prompt month to 4 years forward for a rolling offering of 48 months. 

The contract will be cash settled in US Dollars per MMBtu, with the final settlement price equal to the monthly last settlement price for natural gas as published by the CME Group’s New York Mercantile Exchange (NYMEX) for the month of production. Should this price be unavailable, the final settlement price will be equal to that of the Intercontinental Exchange (ICE) Henry Financial LD1 Fixed Price contract, as published by ICE for the month.

Since launch in 2009, Nodal Exchange has recorded six successive quarterly rises in trading volume and has expanded to offer over 50,000 expiries. 

“With the introduction of this new contract, participants and brokers can now submit OTC trades for natural gas contracts to Nodal Exchange for clearing by LCH.Clearnet, providing cross-margining benefits with their power portfolio.” said Paul Cusenza, Chief Executive Officer of Nodal Exchange.  “We are very happy to once again be able to meet the demands of our market with the rapid introduction of new products and services. As our successive quarterly growth demonstrates, we have seen tremendous demand for our services. We look forward to continuing to meet the needs of our marketplace with ongoing innovation.” 

Roger Liddell, CEO at LCH.Clearnet said: “Our ongoing focus is to respond to the demands of participants and support future growth. Continuing to introduce new contracts and expiries to trading and clearing will open up this exciting market to increased liquidity for both existing and new entrants.”

- Ends – 

               …..More/

To view the press release as a pdf click here.

About Nodal Exchange, LLC

Nodal Exchange is the first independent electronic commodities exchange dedicated to offering locational (nodal) futures contracts and related services to participants in the organized North American electric power markets. Nodal Exchange builds on the success of the existing Regional Transmission Organization/Independent System Operator (RTO/ISO) Day-Ahead and Real-Time markets by offering cash-settled futures contracts in a cleared market enabling Nodal Exchange participants to effectively manage basis and credit risk.  Daily auctions are held on over 90 key locations and weekly auctions on over 1,800 hubs, zones and nodes.  The Nodal Exchange platform also accepts for clearing over-the-counter (OTC) trades for power and natural gas contracts submitted by participants and brokers.  Nodal Exchange is an independent, privately held company.  For more information, visit www.nodalexchange.com.

About LCH.Clearnet

LCH.Clearnet is the leading independent clearing house group, the world’s largest clearer of OTC derivatives and in addition serves major international exchanges and platforms.  It clears a broad range of asset classes including: securities, exchange traded derivatives, commodities, energy, freight, interest rate swaps, credit default swaps and euro and sterling denominated bonds and repos; and  works closely with market participants and exchanges to identify and develop clearing services for new asset classes.

A clearing house sits in the middle of a trade, assuming the counterparty risk involved when two parties (or members) trade.  When the trade is registered with a clearing house, it becomes the legal counterparty to the trade, ensuring the financial performance; if one of the parties fails, the clearing house steps in.  By assuming the counterparty risk, the clearing house underpins many important financial markets, facilitating trading and increasing confidence within the market.

Initial and variation margin (or collateral) is collected from clearing members; should they fail, this margin is used to fulfill their obligations.  The amount of margin is decided by the clearing house’s highly experienced risk management teams, who assess a member’s positions and market risk on a daily basis.  Both the soundness of the risk management approach and the resilience of its systems have been proven in recent times.

LCH.Clearnet is regulated or overseen by the national securities regulator and/or central bank in each jurisdiction from which it operates.