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)
Myshel Guillory(CFO)
Alan Askew (CIO)
Products Offers futures contracts and related services to North American power markets
Website www.nodalexchange.com

Nodal Exchange, a wholly owned subsidiary of the European Energy Exchange (EEX), is a derivatives exchange offering futures contracts on North American power, carbon and Renewable Energy Certificates, natural gas and freight. 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 FairX. FairX is a new exchange announced on May 26, 2021 which offers smaller, simpler, more accessible futures for active individual investors. It is registered with the CFTC and will have self-regulating responsibilities. The exchange offers low-cost, around-the-clock trading access to the most liquid asset classes in the global futures industry.[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.Clearnet 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]

John Lothian News Interviews[edit]

Trucking Freight and Power: Not as Different as You Think – Paul Cusenza, Nodal Exchange

March 29th marks the launch of Nodal Exchange’s trucking freight futures. In this video, Nodal Exchange CEO Paul Cusenza talks about how trucking freight fits in with the rest of Nodal’s offerings and the potential for the exchange to address the financial transmission rights market.


Nodal Exchange CEO Paul Cusenza Discusses The Grid and How Power Trading is Changing
Nodal Exchange CEO Paul Cusenza spoke with JLN Editor-in-Chief Jim Kharouf about how the power markets are changing, the impact of Dodd-Frank on the industry and the growth potential for Nodal Exchange and the power markets. Nodal Exchange is the first commodities exchange dedicated to offering locational (nodal) futures contracts and related services to participants in the organized North American power markets. Published November 12.[24]



JLN interviewed CEO Cusenza when Nodal was acquired by EEX - More power to ‘em: Nodal acquired by EEX

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 and NYISO West.

Nodal Exchange also offers a Henry Hub natural gas contract.

Nodal Exchange, in cooperation with IncubEx, aims to develop and offer products and services that best meet the growing and evolving needs of the North American environmental markets.

Physically deliverable Futures & Options are available for:

Carbon Emission Allowances: California Carbon Allowances (Western Climate Initiative) RGGI Carbon Allowances (Regional Greenhouse Gas Initiative) Renewable Energy Certificates: PJM PJM Tri-Qual RECs DC RECs DC Solar RECs Maryland Tier 1 RECs (also as a bankable contract) Maryland Solar RECs New Jersey Solar RECs New Jersey Class 1 RECs (also as a bankable contract) New Jersey Class 2 REC Ohio Solar RECs Ohio Non-Solar RECs Pennsylvania AEC Tier 1 (also as a bankable contract) Pennsylvania AEC Tier 2 Pennsylvania Solar AEC NEPOOL NEPOOL Dual-Qualified RECs Connecticut Class 1, Class 2 & Class 3 RECs Maine Class 1 RECs Massachusetts Class 1 and Class 2 RECs Massachusetts Class 2 WTE Massachusetts Solar RECs Massachusetts Solar II RECs Massachusetts AEC New Hampshire Class 1 & Class 3 RECs Rhode Island New RECs

NYISO

New York Tier 1 RECs MISO M-RETS REC from CRS Listed Wind Facilities Front Half M-RETS REC from CRS Listed Wind Facilities Back Half ERCOT Texas Compliance RECs Texas Compliance REC from CRS Listed Facilities Front Half Texas Compliance REC from CRS Listed Facilities Back Half Texas Compliance Solar REC from CRS Listed Facilities Front Half Texas Compliance Solar REC from CRS Listed Facilities Back Half Renewable Fuel Credits: California Low Carbon Fuel Standard Oregon Clean Fuels Program Renewable Identification Numbers (RINs) D3 – Cellulosic biofuel D4 – Biomass-based diesel D5 – Advanced biofuel D6 – Renewable biofuel SO2/NOx Emission Allowances CSAPR SO2 Allowances CSAPR TR SO2 Group 1 Allowances CSAPR TR SO2 Group 2 Allowances CSAPR NOx Allowances CSAPR NOx Ozone Season Group 2 Allowances CSAPR TR NOx Annual Allowances [25]

Trading

Nodal Exchange services include both the central limit order book, Nodal LiveTrade and Nodal BlockTrade.

Nodal LiveTrade

Nodal LiveTrade is a central limit order book with a live trading screen where participants may submit orders to transact.

Order Types include:

  • Outright Power at a location (hub, zone or node)
  • Natural Gas at Henry Hub
  • Locational spread between two locations
  • Day Ahead / Real Time spread (DART)
  • Aggregate time periods (strips)
  • Combinations of the above

Nodal BlockTrade

Nodal BlockTrade provides participants with the ability to clear their block trades of Nodal Exchange's futures contracts for power and natural gas. Participants and their brokers can use the Nodal BlockTrade service to submit block trades for clearing by LCH.Clearnet, which occurs during trading hours.

Key People[edit]

Key Shareholders[edit]

Nodal Exchange, LLC is owned by EEX Group, a subsidiary of Eurex.

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)
  • Platts Global Energy Award for “Rising Star Company” (2013)
  • "Newcomer of the Year," Energy Risk Awards (2016) -- Nodal Clear
  • "Clearinghouse Innovation of the Year," Risk Awards (2017) -- Nodal Clear
  • "Commodity Exchange of the Year," Commodity Business Awards (2017)
  • "Exchange of the Year," Energy Risk Awards (2017)
  • "Commodities Exchange of the Year," Energy Risk Awards (2019)

References[edit]

  1. Press Release. CFTC.
  2. Nodal Exchange and IncubEx Announce the Launch of North American Environmental Contracts. Nodal.
  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.com.
  5. FairX. FairX date = June 24, 2021.
  6. Shareholders. Nodal Exchange.
  7. Press Release. LCH.Clearnet.
  8. Press Release. Nodal Exchange.
  9. Press Release. LCH.Clearnet.
  10. Nodal Exchange CEO Paul Cusenza Discusses The Grid and How Power Trading is Changing. John Lothian News.
  11. Press Release. LCH.Clearnet.
  12. Press Release. Energy Biz.
  13. Press Release. LCH.Clearnet.
  14. Press Release. Nodal Exchange.
  15. Nodal Exchange Announces Launch Of Power Options Contracts. Power Online.
  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. [https://www.nodalexchange.com/wp-content/uploads/Self-Certification-Letter-20-030.pdf CFTC Regulation 40.6(a) Certification: Notification of Delisting Eleven (11) Nodal Exchange Trucking Freight Futures Contracts]. Nodal.
  19. Nodal Exchange announces expansion of natural gas futures and introduction of natural gas options. {{{org}}}.
  20. Nodal Exchange acquires U.S. commodities business of Nasdaq Futures, Inc. (NFX). {{{org}}}.
  21. Nodal to expand environmental derivatives. Nodal.
  22. Nodal and IncubEx to Expand Environmental Markets with Seven New Renewable Contracts. Nodal.
  23. Nodal and IncubEx to launch first-ever physically delivered RIN futures. Nodal.
  24. Nodal Exchange CEO Paul Cusenza Discusses The Grid and How Power Trading is Changing. John Lothian News.
  25. Environmental. Nodal.
  26. Press Release. Nodal Exchange.
  27. Press Release. Nodal Exchange.