EnergyClear Corp. launched a new system Friday billed as the first industry-owned and operated over-the-counter (OTC) energy clearinghouse for clearance and settlement of OTC electricity and natural gas trades.

The Houston-based company’s initial products to be cleared include monthly forward contracts for 12 power and 22 natural gas points.

EnergyClear is registered as a derivatives clearing organization (DCO) with the Commodity Futures Trading Commission (CFTC) under the Commodity Exchange Act. EnergyClear said it is the first new DCO not affiliated with a trading facility that was granted registration by CFTC since the rules were modified in 2000.

IntercontinentalExchange (ICE) and the New York Mercantile Exchange (Nymex) also have individually announced their own over-the-counter (OTC) energy clearing services (see Power Market Today July 12 and Daily GPI. May 14). And TradeSpark LP and Virtual Markets Assurance Corp. (VMAC) also have said they will offer a credit transfer and netting system to energy marketers on the Tradespark trading platform next year that will be similar to a clearing system (see Daily GPI, Aug. 7).

EnergyClear plans to provide multi-lateral clearance and settlement of OTC energy transactions directly to its members, with the benefits of multi-lateral netting and trade guarantees. As a DCO, EnergyClear said it would offer participants a “regulated, multi-lateral clearing alternative to the traditional bi-lateral credit support arrangements that have previously been available to the OTC energy markets.”

“EnergyClear represents an important step in the development of a national clearance and settlement system that will financially protect OTC energy transactions from initiation to physical delivery,” said Dennis M. Earle, president. “Energy industry participants will now have direct access to clearance and settlement protections similar to those previously available only through financial intermediaries trading on organized marketplaces.”

As a CFTC-regulated DCO, EnergyClear will become “the buyer to every seller and the seller to every buyer” by interposing itself and its credit between parties to every OTC energy trade accepted by it for clearance and settlement. It will rely on standardized mark-to-market methodologies and default and risk procedures and can readily adapt to ongoing changes in the OTC energy marketplace. EnergyClear said it had established “several tiers of margining and other financial safeguards backed by a $100 million credit facility” from a group of leading commercial banks.

For more information, contact the company through its web site, www.energyclear.com.

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