February 2006 Market Clearing in the Energy Industry 5-39 © Copyright 2006, CCRO. All rights reserved. reported a reduction in TADO (pool risk) of over 65% by implementing weekly billing. FERC cited this result in support of accelerated settlements when it issued its Policy Statement29. An important point for consideration by ISO/RTO’s, regulators, clearing solutions and market participants from the ISO-NE experience is that accelerating settlements is one of the most powerful tools for reducing the risk of loss to the market, and can allow an ISO/RTO, for example, to dramatically reduce collateral requirements for market participants, while decreasing systemic risk to the market as a whole. Moreover, in this example, the ISO/RTO could actually increase the amount of cover to the market (via collateral, guaranty), as a percentage of exposure (or potential exposure), yet market participants would be posting dramatically less collateral than they do presently. An important result to all stakeholders is that two important policy goals can be accomplished simultaneously by accelerating settlements: (i) reducing the risk of loss mutualization to the market and (ii) reducing the amount of collateral required to participate in the market by an individual participant, thereby improving liquidity. While the dramatic benefits of accelerated settlements are highlighted above, netting can have similar dramatic benefits, as again noted by FERC in its Policy Statement. 29 109 FERC ¶ 61,186, paragraph 22