LCH selects onExchange for OTC electricity clearing

Financial technology firm onExchange has signed up with the London Clearing House (LCH) to provide clearing for over-the-counter electricity contracts on the soon-to-be-launched European Energy Derivatives Exchange (Endex).

LCH will use Cambridge, Massachusetts-based onExchange’s Extensible Clearing System (ECS) to process trades. OnExchange said the ECS system supports all products in energy and related markets, including power, natural gas, crude, emissions and weather derivatives.

The company already provides clearing technology to US clearing house EnergyClear, but this is its first involvement in the European energy market. Richard Jaycobs, chief executive of onExchange, said the company is in discussions with LCH about further opportunities, but declined to comment further.

Endex is the successor to the Amsterdam Power Exchange, which ceased operating in May 2001. It is due to launch in the latter part of November and will initially provide OTC clearing services for Dutch baseload and peak physical electricity contracts. Endex said it will add Belgian power contracts at a later date.

LCH has an existing agreement with Atlanta-based Intercontinetal Exchange (ICE) to clear OTC crude, natural gas and other energy products traded on ICE. It also acts as central counterparty to trades on the London International Financial Futures and Options Exchange, the London Metal Exchange and the International Petroleum Exchange, which is owned by ICE.

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