The Houston-based clearinghouse will provide services independent of price discovery. OTC energy contracts are presently negotiated on a principal-to-principal basis, through electronic exchanges or via interdealer brokers over the telephone. Counterparties currently settle their trades under bilateral agreements, under which each party is exposed to the risk that its counterparty will fail to perform.
"EnergyClear will revolutionize the OTC energy markets by reducing the credit, legal, operational, and liquidity risks currently associated with transactions in these markets. As a result, EnergyClear stands to ultimately increase market depth and liquidity for its participants," said Lee Burton, co-founder and recently appointed President of EnergyClear Operations Company and a 21-year veteran of energy markets trading.
EnergyClear's target market includes traders and risk managers of large power generation, marketing and trading entities in the wholesale power and gas market. Within the energy marketplace, electricity is seen as having the potential to become one of the largest traded commodities in the United States.
EnergyClear consists of two entities, EnergyClear Corporation (EC) and EnergyClear Operations Company, LLC (EOC). EC will be owned by leading energy market participants, who will provide industry control, oversight and rule making. The Bank of New York, Prebon Yamane and Amerex will own EOC, and will provide and manage the facilities and technology necessary for the operation of the clearinghouse.
Art Certosimo, senior vice president of The Bank of New York, explains, "EnergyClear's dual structure will allow the energy industry to own and govern a clearinghouse without the prohibitive investment that would otherwise be required to develop the necessary infrastructure and provide ongoing support."
"The formation of EnergyClear reinforces The Bank of New York's position as a leading provider of clearing services worldwide and demonstrates our commitment to expanding our capabilities to meet emerging needs," added Mr. Certosimo. "Our state-of-the-art technology and operational experience will allow EnergyClear to quickly and efficiently clear and settle transactions, thereby minimizing risk and maximizing performance."
Through the EnergyClear joint venture Prebon Yamane and Amerex continue to serve as leaders in the development of innovative solutions to enhance liquidity and meet demands of power marketers, utilities, producers, and institutions in a broad range of energy markets.
