Confidence is critical

Energy and commodities brokers are giving greater priority to clearing as a way of increasing market confidence and creating ‘added value’ services at a time when investor doubt, credit crunches and regulatory intervention are threatening the industry

US senator Dianne Feinstein’s attacks on the energy and commodities derivatives markets, launched in response to Enron’s downfall, have highlighted the importance of counterparty credit risk in the commodity trading business. In response, energy brokers and exchanges are creating a number of competing clearing platforms for over-the-counter energy derivatives.

Feinstein advocated increasing regulation of the OTC market, a change that the International Swaps and Derivatives Association