How does NECC secure its customers’ positions?
NECC is a “Riskless Principal” and takes title to the commodity – all buys are immediately matched with equivalent sells through one or more counterparties, thus eliminating position and price exposure. However, NECC does take the credit exposure on each side of positions entered and fully secures all positions held. To transact with NECC, each participant posts collateral based on its ‘net’ position including net receivables (as an offset to other security requirements) or payables. NECC’s margining policies are based on the well-established margining practices of futures type contracts that have been adapted to accommodate the volatile physical energy markets. In addition, as a physical counterparty, NECC secures delivery and payment obligations associated with physical contracts.
