A global trading exchange and operator of over-the-counter (OTC) markets, IntercontinentalExchange (ICE), and Calgary-based Natural Gas Exchange Inc. (NGX), a leading energy exchange and clearinghouse, said last week they will offer clearing and settlement services for physical OTC natural gas contracts beginning Monday (March 3).
The first two natural gas hubs available for cleared physical delivery will be PG&E citygate and GTN Malin, with additional U.S. hubs to be announced in the near future. NGX's clearing organization will serve as the central counterparty for financial performance while guaranteeing physical delivery.
Atlanta-based ICE "pioneered the concept" of 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 on 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.
ICE offers futures and OTC markets on a single electronic trading platform, including markets for crude oil and refined products, natural gas, power and emissions, as well as agricultural commodities and financial products such as canola, cocoa, coffee, cotton, ethanol, orange juice, wood pulp, sugar, foreign currency and equity index futures and options.
NGX, which bills itself as "North America's largest physical clearing and settlement facility," provides traders with a highly liquid, secure and efficient environment for trading and clearing natural gas and electricity contracts.
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