MEFF is preparing to launch an Energy segment in its CCP. This segment will co-exist with the financial derivatives segment, and any other segments that may be created in the future, within the same legal entity, enabling it to take advantage of the efficiencies offered by this type of structure. Both segments will operate on the basis of a "no contamination" principle, with complete segregation of the guarantees associated with each segment, and no offsetting between them. Consequently, those members who are only active in the financial segment will not be exposed to any loss resulting from a default in the Energy segment and vice versa.
Counterparty to OTC contracts and communication of transactions via the internet
The objective of the project is for the MEFF Clearing House to become the central counterparty for OTC bilateral agreements, by means of a novation, thereby eliminating the counterparty risk and enabling the parties to receive other benefits, such as a larger number of counterparties with which they can trade, transactions being cleared with a single counterparty, back office efficiencies, etc. Transactions may be freely agreed between the parties, either directly with each other or via brokers. The parties and brokers will have a user-friendly, internet-based mechanism for fast communication of transactions. Once the transaction has been accepted by the Clearing House, the transaction novation is produced. In addition, it will be possible to continue using current MEFF terminals to do this.
MEFF, which is continually seeking to offer new products and services, intends to offer the services of its CCP to a market which is experiencing very high growth levels and where dealing volumes have doubled each year since 2006, a market which has benefited from the Spanish government's liberalisation of the Spanish energy market.
The products that can be centrally cleared will be electricity futures and swaps for base load and peak-load contracts in the Spanish system for Annual, Quarterly, Monthly, Weekly and Daily periods. The recording unit will be 1 MW. Contract prices will be in euro per MWh, with a minimum of 2 decimal places and a maximum of 6.
The proposal made by MEFF to the authorities states that this new CCP Segment will have the same types of Members as it currently has. Industrial companies whose usual business is the production, marketing, brokering, distribution or holding of strategic stores of energy (any of these activities), could also become Non Clearing Members in the CCP. Credit institutions and investment services firms could become Clearing Members and Non Clearing Members. MEFF is in the process of contacting all active industrial companies to invite them to take part in this new project.
Two years with no fixed cost
It is proposed that new participants who join, in order to commence operations before the MEFF CCP segment starts up, will NOT be charged a fixed cost for two years.
This initiative is an extension of MEFF's existing activities in the energy sector as the margins manager in CESUR and VPP auctions, manager of the VPP auctions and settlement agent for the Spanish electricity Transport System Operator, Red Eléctrica de España. Furthermore, MEFF brings to the sector the experience it has accumulated and reliability evidenced in a successful Market and CCP for over 20 years.
This project forms part of the changes to MEFF Regulations (please refer to e.meff 22 for more details). Launch of the Energy segment in the MEFF Central Counterparty Clearing House is scheduled for the end of this year.