In response to the sharp decline in market liquidity due to credit issues and heavy collateral requirements, the Federal Energy Regulatory Commission and the Commodity Futures Trading Commission (CFTC) will for the first time hold a joint agency conference to address potential solutions.

Specifically, the one-day conference plans to focus on expanding industry’s use of clearing facilities in the over-the-counter (OTC) energy market. A clearinghouse can step in and assume the risk of transactions for each of the counterparties involved. The clearing process “guarantees the trades…adds certainty to the market, and instills confidence on both sides” of a trade, said Anne Marie Kelly, program analyst for the CFTC’s Division of Clearing and Intermediary Oversight.

The conference will focus in on the use of CFTC-regulated clearing facilities, including the New York Mercantile Exchange, the London Clearing House, Guaranty Clearing Corp., EnergyClear/VMAC and the IntercontinentalExchange (ICE). Representatives from each clearing organization are scheduled to speak, as well as credit analysts and industry executives.

The event “certainly will be eye opening for some folks,” who are unfamiliar with clearing process for OTC energy options, futures and swaps, Kelly said. She noted that FERC approached the CFTC about a month ago about the conference, and raised clearing as a possible fix for credit-poor companies to continue buying and selling energy.

The cooperative FERC-CFTC effort is expected to be a follow-up to a recent Commission conference that addressed the reduced capital availability to the energy markets in the wake of widespread scandals, corporate wrongdoing and a depressed market conditions. “Why is there a lack of capital? A lot of people don’t have confidence in the markets,” Kelly noted. The clearing process, she believes, could help to restore some of that confidence.

The day-long event will be take place at FERC’s headquarters on Feb. 5, starting at 9 a.m. Both FERC Chairman Pat Wood and CFTC Chairman James Newsome are expected to make opening remarks. Commissioners from the two agencies will attend at least a portion of the conference, according to Kelly.

The conference agenda is available on the CFTC web site at https://www.cftc.gov, and on FERC’s web page at https://www.ferc.fed.us. Interested parties also can contact Kelly at (202) 418-5431, or Bryan Lee of FERC at (202) 502-8680.

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