The London Clearing House (LCH) is to use onExchange's extensible clearing system for over-the-counter (OTC) power transactions. These will be executed on the European Energy Derivatives Exchange (Endex), which is set to launch later this year.
Richard Jaycobs, CEO, onExchange, welcomes LCH's support of existing OTC market trading protocols in addition to futures-style clearing. He believes it will accelerate the adoption of centralised clearing by the OTC commodity and financial market participants.
He says: "This will bring significant operational and financial benefits to the entire derivatives trading community."
Massachusetts-based onExhange says centralised clearing offers several benefits to OTC markets. These include operational efficiencies, credit risk reduction, the expansion of trading counterparties by market participants and a reduction in the collateral required to back trading commitments.
The company has been working with LCH for over a year to develop a new clearing system for energy products, including OTC and standard instruments.