Energy clearing in Catch 22 situation, says Fitch

Denise Furey, New York-based senior director of global power at rating agency Fitch believes that the clearing of OTC energy derivative contracts is in something of a ‘Catch 22’ predicament. “We need standardization 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 today’s Energy Risk conference in Houston.

Furey said that 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 & risk

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