EEX to offer clearing for OTC forwards

Germany’s European Energy Exchange (EEX) plans to become the first power exchange in continental Europe to offer central counterparty clearing services for over-the-counter (OTC) electricity forward transactions.

EEX said OTC clearing, which will be available from March, will bring down the costs of putting up collateral compared with trading off the exchange, since long and short positions are netted on a daily basis.

The exchange will use the same clearing structure for OTC clearing as already occurs on the regulated EEX futures market. EEX, as central counterparty, guarantees the fulfillment of all transactions on the exchange, and bears the risk of default for the other participants. Respective clearing banks of the trading participants have to put up the necessary collateral at the clearing house. "In the liberalised power market, hedging the risk of default by the counterparty is becoming increasingly important," said Hans Schweickardt, EEX executive board member.

EEX is currently merging with former rival the Leipzig Power Exchange.

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