IntercontinentalExchange (ICE) flexed its muscles on Thursday, revealing its strong position in the U.S. over-the-counter (OTC) natural gas market. The exchange said about one million natural gas contracts have been cleared through its system since March with a notional value of about $10 billion. ICE said it also set a new daily cleared volume record for natural gas transactions in the United Kingdom on Thursday and has cleared more than one billion therms in the that country since September.

David Donat, manager of operations and risk control at Conectiv Energy Supply, said the key to ICE’s success has been the number of counterparties using the system. “We are able to trade with more counterparties, meaning increased liquidity, and we reduce our credit exposure in those markets,” he said. “Our bilateral lines are then used more efficiently in markets where clearing is not available. We believe every firm that trades on ICE should get set up to clear.”

Trading on ICE grew exponentially after the fall of Enron Corp. and its tremendously popular proprietary trading platform, Enron Online, late last year. ICE signed a deal with the London Clearing House (LCH) in August 2001 to have LCH provide clearing services for gas trades in the United States and the United Kingdom that are done on ICE (see Daily GPI, Aug. 30, 2001). Clearing services started last spring.

ICE’s main rival, the New York Mercantile Exchange, also provides clearing of OTC natural gas products and said earlier this week that $1.5 billion in OTC instruments (for natural gas, power and other commodities) have been cleared since clearing services began at the end of May (see Daily GPI, Nov. 5). Nymex said that as of Nov. 1 it had cleared 441.1 trillion Btus of gas and 152,800 MWh of power.

Nymex provides clearing of natural gas transactions at the Henry Hub and seven principal basis pricing points in the United States: Chicago Citygate, Houston Ship Channel, Northwest Pipeline Rockies, Panhandle Eastern Pipe Line Co. Texas-Oklahoma mainline, San Juan Basin, Southern California, and Transco Zone 6 New York, as well as electricity transactions at the Pennsylvania-New Jersey-Maryland regional power hub (PJM Interconnection). Currently ICE provides clearing only for transactions at the Henry Hub.

A new rival stepped into the OTC ring last month. Houston-based EnergyClear launched its own OTC clearinghouse for power and gas trades during the first week in October. EnergyClear also is registered as a derivatives clearing organization (DCO) with the Commodity Futures Trading Commission (CFTC) under the Commodity Exchange Act. For more information on EnergyClear, contact the company through its web site, www.energyclear.com

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