Nodal Exchange

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Nodal Exchange
Nodal logo color.jpg
Founded 2007
Headquarters Tysons Corner, Virginia
Key People Paul Cusenza (CEO)
Demetri Karousos (COO)
Palloma Peterson(CFO)
Alan Askew (CIO)
Products Offers futures and options contracts and related services to North American power markets
Website www.nodalexchange.com

Nodal Exchange, a part of the European Energy Exchange (EEX), is a derivatives exchange offering futures and options contracts on North American power, environmental and natural gas. All Nodal Exchange contracts are cleared by Nodal Clear LLC, a CFTC registered derivatives clearing organization (DCO). [1][2]

Nodal Clear LLC's reach was expanded by the CFTC on November 13, 2020 when the U.S. regulatory agency approved an Amended Order of Registration for Nodal's clearing arm that allowed it to clear for other designated contract markets in addition to the Nodal Exchange. [3][4]

Nodal Clear LLC, a clearinghouse providing central counterparty clearing services, now clears contracts for Nodal Exchange and Coinbase Derivatives Exchange (formerly FairX).[5]

History[edit]

Nodal Exchange, headquartered outside of Washington D.C. in Tysons Corner, VA, was founded in mid-2007 to offer power derivatives contracts on US electricity locations, also known as nodes. It forged a partnership in November 2007 with LCH to develop a trading and clearing service in North America for cash settled power futures contracts. [6][7]

Its initial shareholders included private equity firm DC Energy, Macquarie Energy and utility company NextEra. In early 2009, Nodal completed its ownership structure and expanded its board of directors. On April 8, 2009 Nodal Exchange launched its service to provide trading and clearing of nodal power contracts. The service initially covered day-ahead trading at nodes across ISO New England, New York ISO, PJM Interconnection, and Midwest Independent Transmission System Operator.[8][9]

Nodal Exchange was the first commodities exchange dedicated to offering locational (nodal) futures contracts and related services to participants in the organized North American power markets. The exchange offered daily auctions in over 90 key locations and weekly auctions on over 1,800 hubs, zones and nodes and accepted clearing for over-the-counter (OTC) cash settled trades for power and natural gas contracts submitted by participants and brokers.[10] [11] Later that year it added California ISO, ERCOT and Henry Hub natural gas contracts. [12][13][14]

In October 2012, the exchange filed for designated contract market status with the Commodity Futures Trading Commission, in response to Dodd-Frank Act rule changes for OTC markets. On September 30, 2013, Nodal Exchange began operation as a DCM, or a US futures exchange.

On April 29, 2014, Nodal introduced 18 new power futures contracts covering 3 hub locations in MISO South - Arkansas, Louisiana, and Texas hubs. Nodal Exchange was the first exchange to offer cleared power futures contracts for MISO South locations.

Nodal decided to build and operate its own clearing house. In September 2015, the CFTC granted Nodal Clear, LLC as a derivatives clearing organization. On October 19, 2015, Nodal Exchange, LLC announced the migration of 100 percent of the positions in Nodal Exchange contracts from LCH.Clearnet to Nodal Clear, the new clearing house subsidiary of Nodal Exchange.

In December 2015, Nodal Exchange introduced 40 new power futures contracts to support trading in Southwest Power Pool (SPP). These were the first SPP futures contracts offered by Nodal Exchange and the first futures contracts to be offered by any exchange on 16 new locations.

In May 2016, Nodal Clear, the clearing house subsidiary of Nodal Exchange, was named “Newcomer of the Year” by Energy Risk magazine at The Energy Risk Awards 2016.

In March 2017, German-based EEX, acquired Nodal, giving EEX its first foothold in North America.

In June 2017, Nodal Exchange offered their first power options contracts. [15]

In November 2018, Nodal launched its first carbon and renewable energy credit futures with its partner, IncubEx. The new contracts marked the expansion of Nodal Exchange’s products into the environmental markets sector, including futures and options on: California Carbon Allowances, Regional Greenhouse Gas Initiative Allowances (RGGI), New Jersey Solar Renewable Energy Certificates, PJM Tri-Qualified Renewable Energy Certificates and 11 other emissions and renewable contracts.

The exchange launched North American freight futures on March 29, 2019. The exchange is partnered with FreightWaves, to launch and expand those contracts and tapping into a $726 billion industry in the US. Nodal delisted the freight futures contracts in August 2020.[16][17][18]

Nodal Exchange, LLC introduced seven new Henry Hub natural gas contracts in September 2019. These contracts represented a significant expansion of Nodal Exchange’s natural gas products suite and the first natural gas options contracts to be offered by Nodal Exchange. [19]

On November 12, 2019, Nodal Exchange, as part of EEX Group, and Nasdaq Futures, Inc. (NFX) acquired NFX’s futures and options exchange business including the portfolio of NFX contracts. The transaction involved the transfer of existing open positions in U.S. power, U.S. natural gas, crude oil and ferrous metals futures and options contracts to Nodal Clear.[20]

In 2020, Nodal Exchange, in partnership with IncubEx continued to list new environmental market contracts in renewable energy certificate and renewable fuels markets in North America. Nodal listed the first physically delivered contracts on the California Low Carbon Fuel Standard allowances in January 2020, Oregon Clean Fuel Program allowances in June 2020 and Renewable Identification Number (RINs) credits in November 2020. It also added 22 new futures and options on 12 separate and distinct REC and renewable fuels markets in North America. (Nodal counts futures and options as separate contracts.) Nodal's total number of environmental contracts listed rose to 82 futures and options contracts on 49 distinct environmental markets, the largest suite of environmental contracts in the world.[21][22][23]

On June 7, 2022, Nodal Exchange and IncubEx announced the planned launch of new environmental products including several first-of-their-kind futures contracts in renewable energy credits, renewable natural gas certificates (renewable thermal certificates) and voluntary carbon offsets.[24]

John Lothian News Interviews[edit]

NODAL CEO PAUL CUSENZA EXPLAINS HOW NODAL IS GROWING AS PART OF THE EEX FAMILY

Paul Cusenza, Chairman and CEO of Nodal Exchange and Nodal Clear, was interviewed by John Lothian News at the FIA International Futures Conference in Boca Raton, FL., about Nodal’s growth from a start-up in 2009 and the ways it operates as a clearing house and collaborator to introduce products. Cusenza discussed the interconnected markets of natural gas and electric power, and how geopolitical forces and the weather are shaping those markets, making Nodal Exchange’s risk management role important. He said it’s nice to be part of the EEX family of markets vs. being a start-up and there’s a great benefit to sharing knowledge with other companies. He also talked about the new clearing relationship with Coinbase derivatives exchange, where Nodal’s risk management skills are key. Anyone starting an exchange can contact Nodal for clearing services, but Nodal also simply collaborates with clients, he said. A recent example is environmental markets, where Nodal is working with IncubEx, the pioneers who created the Climate Exchange. IncubEx members, through their collaboration, act as Nodal’s team and work closely with clients.

Products and Services[edit]

Contracts

Nodal Exchange offers contracts for on-peak and off-peak power at commercially significant hubs, zones, and nodes in the following electric markets: ISO-NE, NYISO, PJM, MISO, ERCOT, SPP and CAISO, as well as Mid-C.

Futures contracts are for monthly terms for both peak and off-peak time periods. Contracts for select locations are available for more granular off-peak periods (e.g., 7×8 and 2×16). Contracts are available for settlement to Locational Marginal Price (LMP), Energy + Congestion, or Energy only prices as published by the RTOs/ISOs, creating flexibility for participants to hedge positions for LMP and its components of Energy, Congestion, and Loss as appropriate.

Monthly Options on the corresponding futures contracts are available for eight locations in ISO-NE, NYISO, PJM, MISO, ERCOT, and CAISO, as well as Mid-C. Calendar Year Options are available for PJM Western Hub, PJM AEP-Dayton Hub and NYISO West.

Nodal Exchange also offers a Henry Hub natural gas contract.

Nodal Exchange, in cooperation with IncubEx, offers environmental contracts.

Physically deliverable Futures & Options are available for:

Carbon Emission Allowances: California Carbon Allowances, RGGI Carbon Allowances, Washington Carbon Allowances Carbon Emission Offsets California Carbon Offset, Carbon Removal, Certified Emission Reduction, Global Emission Reduction , Verified Emission Reduction Renewable Energy Certificates: PJM, NEPOOL, NYISO, Electric Reliability Council of Texas (ERCOT), Midwest Renewable Energy Tracking System (M-RETS), North American Renewables Registry™ (NAR), Western Renewable Energy Generation Information System (WREGIS) Renewable Fuel Credits: California Low Carbon Fuel Standard, Oregon Clean Fuels Program, Renewable Identification Numbers, Renewable Natural Gas Certificates Other Emissions Allowances: CSAPR SO2 Allowances, CSAPR NOx Allowances

[25]

Trading

Nodal Exchange offers electronic trading in power, natural gas, and environmental products. The Nodal T7 Trading Platform can be accessed via industry leading web-based trading applications: CQG, Trayport and TT. Nodal also offers direct market access for qualifying participants.

Nodal T7 Trading Platform

The Nodal T7 Trading Platform offers world-class stability, latency and security. Nodal T7 also significantly reduces time-to-market for introducing new products and features and allows for a more flexible schedule for software updates.

Tradable Products: Power Futures Hubs and Zones – 5 MW, 25 MW, and 50 MW books; Environmental Futures; and Gas Futures

Nodal LiveTrade

Nodal LiveTrade is a proprietary Nodal trading screen and central limit order book that complements the products available on the Nodal T7 Trading Platform.

Tradable Products: Power Futures Hubs, Zones, and Nodes – 1 MW books; Power Options; and Environmental Options.

Nodal BlockTrade

Participants and their authorized brokers can submit block trades, composed of blocks of Nodal Exchange’s futures and options contracts, to Nodal BlockTrade, and these trades will be cleared by Nodal Clear during trading hours.

Sustainability at Nodal Exchange[edit]

Information about Nodal Exchange's corporate commitment to sustainability can be found on its website here.

Key People[edit]

Key Shareholders[edit]

Nodal Exchange, LLC is owned by EEX Group, a member of Deutsche Börse Group.

Honors/Awards[edit]

  • “Innovation of the Year,” Energy Risk Awards (2010)[26]
  • Platts Global Energy Award of Excellence, Rising Star category (2010)[27]
  • "Exchange of the Year," Energy Risk (2013)[28]
  • Platts Global Energy Award for “Rising Star Company” (2013)[29]
  • "Newcomer of the Year," Energy Risk Awards (2016)[30]
  • "Clearinghouse Innovation of the Year," Risk Awards (2017)[31]
  • "Commodity Exchange of the Year," Commodity Business Awards (2017)
  • "Exchange of the Year," Energy Risk Awards (2017)[32]
  • "Commodities Exchange of the Year," Energy Risk Awards (2019)[33]
  • "Exchange of the Year", Energy Risk Awards (2020)[34]
  • "Exchange of the Year", Energy Risk Awards (2021)[35]
  • "Exchange of the Year", FOW International Awards (2021)[36]
  • "Exchange of the Year", Energy Risk Awards (2023)[37]

References[edit]

  1. Press Release. CFTC.
  2. Nodal Exchange and IncubEx Announce the Launch of North American Environmental Contracts. Nodal Exchange.
  3. CFTC Approves Nodal Clear, LLC to Clear for Other Designated Contract Markets. CFTC.gov.
  4. CFTC Approves Nodal Clear, LLC to Clear for Other Designated Contract Markets. Nodal Exchange.
  5. Coinbase. Coinbase date = June 24, 2021.
  6. Shareholders. Nodal Exchange.
  7. Press Release. LCH.
  8. Press Release. Nodal Exchange.
  9. Press Release. LCH.
  10. Nodal Exchange CEO Paul Cusenza Discusses The Grid and How Power Trading is Changing. John Lothian News.
  11. Press Release. LCH.
  12. Press Release. Nodal Exchange.
  13. Press Release. LCH.
  14. Press Release. Nodal Exchange.
  15. Nodal Exchange Announces Launch Of Power Options Contracts. Nodal Exchange.
  16. MW18: Freight Futures will launch on the Nodal Exchange March 29. Freight Waves.
  17. Nodal Exchange, FreightWaves and DAT® Successfully Launch the World’s First Trucking. Freight Waves.
  18. CFTC Regulation 40.6(a) Certification: Notification of Delisting Eleven (11) Nodal Exchange Trucking Freight Futures Contracts. Nodal Exchange.
  19. Nodal Exchange announces expansion of natural gas futures and introduction of natural gas options. Nodal Exchange.
  20. Nodal Exchange acquires U.S. commodities business of Nasdaq Futures, Inc. (NFX). Nodal Exchange.
  21. Nodal to expand environmental derivatives. Nodal Exchange.
  22. Nodal and IncubEx to Expand Environmental Markets with Seven New Renewable Contracts. Nodal Exchange.
  23. Nodal and IncubEx to launch first-ever physically delivered RIN futures. Nodal Exchange.
  24. Nodal Exchange and IncubEx Collaborate to Launch First-of-Their-Kind Environmental Futures and Options. IncubEx.
  25. Environmental. Nodal Exchange.
  26. Nodal Exchange Named “Innovation of the Year” at Energy Risk Awards 2010. Nodal Exchange.
  27. Nodal Exchange Receives 2010 Platts Global Energy Award of Excellence. Nodal Exchange.
  28. Nodal Exchange Named “Exchange of the Year” at Energy Risk Awards 2013. Nodal Exchange.
  29. Nodal Exchange Wins a 2013 Platts Global Energy Award. Nodal Exchange.
  30. Nodal Clear Named “Newcomer of the Year” at Energy Risk Awards 2016. Nodal Clear.
  31. Nodal Clear Awarded “Clearing House Innovation of the Year” at the Risk Awards 2017. Nodal Clear.
  32. Nodal Exchange Named “Exchange of the Year” at Energy Risk Awards 2017. Nodal Exchange.
  33. Nodal Exchange named “Commodity Exchange of the Year” by Energy Risk. Nodal Exchange.
  34. Nodal Exchange named Exchange of the Year by Energy Risk. Nodal Exchange.
  35. PNodal Exchange named Exchange of the Year by Energy Risk for third year in a row. Nodal Exchange.
  36. Nodal Exchange wins Exchange of the Year at FOW International Awards 2021. Nodal Exchange.
  37. Nodal Exchange Named Commodity Exchange of the Year by Energy Risk. Nodal Exchange.