Nodal Exchange, LLC and LCH.Clearnet Ltd (LCH.Clearnet) are to offer trading and clearing for a Henry Hub natural gas contract.
The contract, which will be launched in the fourth quarter of 2010, will allow Nodal Exchange participants to enhance capital efficiency by cross-margining their power and natural gas portfolios using VaR margining. The Henry Hub natural gas contract will be available through Nodal Exchange’s cleared over-the-counter (OTC) trade platform.
The Henry Hub contract will have a monthly term with a lot size of 2,500 MMBtu per month. Contract expiries will extend from the prompt month to 4 years forward for a rolling offering of 48 months.
The contract will be cash settled in US Dollars per MMBtu, with the final settlement price equal to the monthly last settlement price for natural gas as published by the CME Group’s New York Mercantile Exchange (NYMEX) for the month of production. Should this price be unavailable, the final settlement price will be equal to that of the Intercontinental Exchange (ICE) Henry Financial LD1 Fixed Price contract, as published by ICE for the month.
“Beginning later this year, participants and brokers will be able to submit cleared OTC trades for natural gas contracts to Nodal Exchange for clearing by LCH.Clearnet, providing cross-margining benefits with their power portfolio. We are very happy to be able to offer this advantage to Nodal Exchange participants and also welcome new participants focused on the natural gas market to our trading community,” said Paul Cusenza, chief executive officer of Nodal Exchange.
Roger Liddell, ceo at LCH.Clearnet said: “This is another important step that brings greater efficiency to the Nodal marketplace. The correlation between the natural gas and power contracts will allow market participants to gain significant benefits through cross-margining, improving collateral management and increasing liquidity.”
