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From 21 November 2011 European Commodity Clearing AG (ECC) will offer its clearing participants considerably increased savings potentials through cross-margining effects. To this end, ECC will use a new calculation logic based on SPAN® to determine the margin requirements. This system is used for commodity margining by a large number of exchanges and clearing houses.
All positions held by participants on the Derivatives Market are continuously checked for possibilities for offsetting. Cross-margining effects are created by offsetting opposite positions on the Derivatives Market with the amount of the savings based on the extent of the correlation of the changes in the prices of the products traded (spreads).
With the new system ECC hones its margin calculation and uses all cross-margining potentials which result from the combination of opposite positions. In this context, the new cross-margining considers all commodities cleared by ECC (power, natural gas, emission rights and coal) as well as all delivery areas, maturities and periods within a given product. While, in the past, a margin parameter was established across all maturities of a given product, the margin parameters are now determined for every individual maturity and updated daily rather than on a monthly basis (as has been the case so far).
“We are very pleased that we can offer our customers increased flexibility and a high savings potential – in particular, in bigger portfolios“, says Dr. Thomas Siegl, Chief Risk Officer of ECC. “A large number of factors, e.g. extended margin credits or the presence of oppo- site positions with fully overlapping delivery periods, can now be included in the calculation of the margins. As a result, our customers can considerably reduce their margin requirements and have to tie up less liquidity while protection against the counterparty risk remains the same.“
European Commodity Clearing AG (ECC) is the central clearing house for energy and related products in Europe. The Leipzig-based company was established in the year 2006 with the spin-off and transfer of the clearing activities of European Energy Exchange AG (EEX) to this company. In its capacity as the central counterparty, ECC assumes clearing as well as physical and financial settlement of transactions concluded on APX-ENDEX, the CEGH Gas Exchange of the Vienna Stock Exchange, EEX, EPEX SPOT, HUPX and Powernext as well as clearing and settlement of transactions registered for OTC clearing on these exchanges.
'SPAN®' is a registered trademark of Chicago Mercantile Exchange Inc. Chicago Mercantile Exchange Inc. assumes no liability in connection with the use of SPAN® by any person or entity."
