Overview
Nodal Exchange offers on-peak and off-peak power contracts at commercially significant hubs, zones and nodes in the following organized electric markets: ISO-NE, NYISO, PJM, MISO and CAISO in addition to four hubs and four zones in ERCOT. In the future, Nodal Exchange will extend its platform to other market regions in the United States and Canada. All Nodal Exchange power contracts can be traded in the weekly auction and over 90 locations, as well as, the Henry Hub natural gas contract, can be traded in the daily auctions. Over-the-counter (OTC) cash settled trades for power and natural gas are also accepted for clearing daily.
Benefits of Nodal Exchange
Granular Contracts
Nodal Exchange offers futures contracts on ~1,800 hubs, zones and nodes in the RTO/ISO markets. The auction format allows Nodal Exchange the ability to accept trades in as little as 1 MW increments at commercially significant nodal, zone and hub locations on the physical grid. Natural gas contracts trade in increments of 2,500 MMBtu per month.
Trading Flexibility
Auction order types can include: outright power or natural gas at a location, locational spreads between two nodes, calendar spreads, Day Ahead / Real Time power settlement spreads (DART), and aggregate time periods (strips). Nodal Exchange Participants representing small loads, including demand providers or individual generators, as well as market makers and other holders of large portfolios are able to address their individual business requirements through participation in the auctions. The cleared OTC trade platform for both power and gas contracts provides additional flexibility.
Credit Risk Management
One of the major advantages Nodal Exchange offers to its Participants is the full clearing of all trades through its Central Counterparty (CCP): LCH.Clearnet. LCH.Clearnet is the leading independent clearing house, serving major international exchanges and platforms, as well as a range of OTC markets. With its broad reach, experience, and large capital base, LCH.Clearnet allows Nodal Exchange Participants to concentrate on the market itself rather than on counterparty or credit risks.
Capital Efficiency
Nodal Exchange provides effective risk management and superior capital efficiency through the use of Value-at-Risk (VaR) margining offered by LCH.Clearnet. This robust and effective approach to margining, which accounts for the correlations between many different contracts, even inter-ISO and cross commodity (e.g., power and gas) positions, results in greater capital efficiency for Nodal Exchange Participants.
Price Discovery and Market Liquidity
Nodal Exchange auctions and cleared OTC trades provide superior price discovery and market transparency. Daily marks are provided to participants on over 50,000 expiries.
Product Innovation
Nodal Exchange's flexible auction format allows for the rapid introduction of additional products. Nodal Exchange, with LCH.Clearnet's support, works with market participants to develop products that meet the needs of the market.