Energy clearing in Catch 22 situation, says Fitch

“We need standardisation of contract documentation to get to clearing in the first place. But if standardised products are to work we need clearing,” Furey told delegates at this week's Energy Risk conference in Houston.

Furey said this situation poses an obstacle for the development of clearing within the industry, arguing that while clearing may be beneficial for the market as a whole, it may take some time before traders are able to clear their contracts on a regular basis.

Clearing houses protect against counterparty default and reduce the amount of collateral a company must post to back its OTC natural gas and power trades.

Robert Stibolt, senior vice-president of strategy, portfolio and risk ranagement, at Tractebel Norh America, agreed that clearing has taken longer to take off than was initially expected.

Some clearing houses have already shut up shop, including Clearing Bank Hanover and Houston-based EnergyClear, although the New York Mercantile Exchange and the Atlanta-based IntercontinentalExchange both say that an increasing number of OTC contracts are cleared through them.

“I’m personally disappointed that clearing has taken so long to take off,” Stibolt said. “Perhaps it's time to create a direct clearing solution that will help create liquidity and make the [energy trading] markets more accessible.”

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