IntercontinentalExchange, Inc. (NYSE: ICE) and Natural Gas Exchange Inc. (NGX), a wholly owned subsidiary of TMX Group Inc. (TSX: X), today announced plans to provide deal entry capability to energy brokers for physically cleared OTC natural gas contracts.
Under this arrangement and effective immediately, energy market participants who are ICE and NGX customers may designate specific brokerage firms to enter physical transactions for clearing through NGX utilizing the ICEBlock(sm) system. As part of the ICE/NGX alliance announced last year, physical clearing services are currently offered at three U.S. hubs: GTN Malin, PG&E Citygate and Henry Hub. Physical product clearing services will be added for Panhandle Eastern Pool, NGPL TxOk East and Northern Natural’s Demarc on August 5, 2008. Volumes at these hubs have grown steadily each month since physical clearing services were initiated in March 2008 as a result of new participants and increased liquidity at the hubs.
"This arrangement provides approved brokers with direct access to NGX’s physical clearing services on behalf of their clients," said NGX president Peter Krenkel. "Broker participation will allow NGX to grow open interest and will provide brokers with another tool to close physical deals between credit-constrained counterparties."
"The ICEBlock system was designed to allow direct broker input and has proven to be an effective tool," said Chuck Vice, ICE president and coo. "We introduced our innovative financial clearing solution for energy products in 2002, and NGX introduced physical clearing over a decade ago. In that time, customers have benefited from the removal of counterparty credit risk in bilateral transactions, and the resulting liquidity by expanding these markets."
NGX’s effective clearing and settlement model has achieved unparalleled success in facilitating physical energy transactions, giving Canada exceptional liquidity in its physical gas markets. NGX has enabled more than $400 billion of physical gas transactions since its inception in 1994. In 2007, over 8.8 trillion cubic feet of natural gas was traded on NGX.
Brokerage firms interested in physically cleared OTC natural gas contracts must execute an ICE Broker Agreement in order to qualify and be registered with ICE as an enabled broker.
