Keeping to the original plan of rolling out physical clearing services at specific delivery points over time, Atlanta-based IntercontinentalExchange (ICE) and Calgary-based Natural Gas Exchange Inc. (NGX) said last week that through their alliance, they will offer clearing and settlement services for physical over-the-counter (OTC) natural gas contracts at the Henry Hub delivery point beginning April 7.
As with the physical clearing services successfully introduced on March 3 at the PG&E citygate and GTN Malin (see NGI, March 3), NGX's clearing organization will serve as the central counterparty for the physical delivery and financial performance.
"The launch of physical clearing for two of ICE's Western hubs earlier this month surpassed our initial expectations," said ICE CEO Jeffrey C. Sprecher. "We're pleased to have seen strong double-digit growth in the liquidity of these first cleared physical contracts, and strong demand from market participants for this service at the benchmark Henry Hub location."
Peter Krenkel, president of NGX, added: "We're delighted that so many ICE customers in the West have responded positively to the security, efficiency and liquidity NGX clearing offers, and we expect to see even more interest at the Hub."
ICE began OTC clearing for financially settled natural gas and power contracts in 2002. NGX has been clearing physical natural gas contracts at Canadian hubs since 1994. The physical clearing at select U.S. trading hubs will be available as part of the previously announced alliance between ICE and NGX (see NGI, April 2, 2007).
The March 2007 agreement to form an alliance was viewed as a "win-win" for both companies. The agreement gave NGX, which has a robust Canadian physical trading and clearing business, entry into the United States. The cleared and bilateral markets for North American physical gas and Canadian electricity operated by NGX and ICE are offered together on ICE's electronic platform. In turn, NGX serves as the clearinghouse for these products. The move complements the clearing ICE offers in its OTC markets for financial contracts. NGX also uses the ICEBlock system to electronically accept for clearing off-exchange transactions in financial gas and other energy products.
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