The Nasdaq OMX Group (Nasdaq:NDAQ) today announced the purchase of the business of North American Energy Credit and Clearing Corp. (NECC), a Chicago-based clearinghouse for the over the counter (OTC) power and gas markets.
The NECC transaction closed on March 3. Financial terms were not disclosed.
"NASDAQ OMX continues to expand its presence in OTC commodities and clearing, and this acquisition presents us with an opportunity to deliver what the U.S. power and gas market currently lacks: a clearinghouse with the flexibility to clear both financial and physical instruments," said Bob Greifeld, Chief Executive Officer of The NASDAQ OMX Group. "The U.S. power and natural gas market is another area where we can strategically apply our exchange technology and an innovative clearing solution to reduce risk, increase volume, and better serve the customer through improved services and lower cost."
NASDAQ OMX is an experienced operator in the energy and commodities space through its Nord Pool market, the world's largest power derivatives exchange which has been in operation for 15 years. The exchange recently launched N2EX, its marketplace for physical UK power contracts.
"The support and resources of NASDAQ OMX will enable our team to expand our offering over the entire continental U.S. and provide the clearing facility that the industry has been seeking," said George Sladoje, former Chairman and CEO of NECC.
The NASDAQ OMX Commodities Clearing operation will be led by Geir Reigstad, Head of NASDAQ OMX Commodities. NASDAQ OMX has several operations in clearing across multiple asset classes, including majority-owned IDCG, which provides clearing for interest rate swaps.
NASDAQ OMX also recently completed the first cross-border merger of clearing houses with the combination of its Nord Pool and Nordic clearing houses to clear Nordic equities, fixed income and power derivatives. NASDAQ OMX plans to offer central clearing in its U.K.
power derivatives market in 2010.
The NECC acquisition follows NASDAQ OMX's recent purchase of a majority stake in Agora-X, which enables institutional market participants to efficiently negotiate OTC transactions ns in commodity and derivative contracts.
NECC's business supports the U.S. physical power and gas markets by integrating the physical and financial markets through market-neutral clearing services. It develops and provides clearing services to North American energy markets. The business' key customers include physical traders such as utilities and merchant generators, and financial traders such as banks and hedge funds. Operating as a market-neutral 'riskless principal', the clearinghouse enters matching positions with different counterparties and manages the credit risk on both sides using standard clearinghouse type margining.