How It Works

How It Works

Trade Execution

Once contracts are in place, certain collateral must be in place prior to transacting. NOCC's customers can then transact with NOCC directly and through voice brokers. NOCC enters into matching transactions as a buyer to a seller and seller to a buyer at an agreed price. Confirmations will identify NOCC as a counterparty to the buyer and seller. (See diagram 1.)

NOCC Operational Overview: 1. NOCC trade execution

Margining and Settlement

NOCC's margining policies are based on traditional margining of futures type contracts with adaptations to accommodate physical energy markets.

At the time of trade execution NOCC requires original or cure margin to be in place which establishes it customer's trading limit with NOCC. Original margin is based on a probabilistic determination of maximum price movement during the period of time it would take to 'cure' a default, usually two business days. During the life of the contract NOCC 'marks-to-market' requiring additional security based on changing prices. For delivery, customers are required to provide margin to secure their payment obligations. Customers who are net sellers are able to use their receivable positions to offset other security requirements.

2. NOCC secures/settles all trades

Allowable forms of security include Letters of Credit from pre-approved banks and cash. Cash is held in a segregated customer account at Harris Bank, NOCC's clearing bank which also handles ultimate settlement at the specified settlement date.

Customers transacting with NOCC can be assured that its risk management policies and practices operate to fully secure each of its customer's net position. As an added assurance, Credit Suisse independently verifies and confirms on a daily basis that liquid collateral has been posted in the appropriate collateral accounts to cover NOCC's margin requirements.

Scheduling and Delivery

As a counterparty to both buyer and seller, NOCC schedules power and nominates gas in accordance with protocols at established delivery locations. NOCC maintains a balanced schedule for delivery.

3. NOCC schedules delivery