February 2006 Market Clearing in the Energy Industry 69 © Copyright 2006, CCRO. All rights reserved. NCC/ North American Energy Credit and Clearing Corp (“NECC”) New York Mercantile Exchange (“NYMEX”) ICE/LCH Clearnet Virtual Markets Assurance Corporation (“VMAC”) Natural Gas Exchange receivable positions for gas and power markets in all markets where its services are offered. possible across both OTC and Futures products. swaps are exempt from the automatic stay provisions of the bankruptcy code. Default Mechanism s Capital Adequacy NCC secures all positions using SPAN® and underlying CFCs™ are fully secured by cash, treasury securities, letters of credit by approved banks and/or lines of credit backed by A+ or higher rated financial institutions and insurance products. Additional protection is afforded through risk management policies that, among other things, requires up front cure margin, which establishes trading limits on ICE. Based on its security profile and backing by A+ credit support, NCC believes that once it has begun significant operations, it will achieve an A+ or better rating and has Fitch under contract for that analysis. NYMEX maintains a credit rating of AA+ with S&P. As well as the SPAN (Standard Portfolio and Analysis) calculated margins. The NYMEX has a $140 million guaranty fund based on Clearing Members capital, supplemented with a $100 million insurance policy and the ability to assess its Clearing Members to cover a default. LCH Clearnet has a multi- level capital adequacy structure. In the event of a default the defaulting member’s margin contribution s and default fund contribution s are available. If that is insufficient LCH’s current year profit plus the complete default fund of over $1.1 billion can be used. Beyond that there is $360 million of insurance cover plus any remaining clearing house assets. LCH uses LCH SPAN methodolog As well as margin posted by participants, VMAC has obtained an insurance policy, which protects against a loss of $50 million per default, $300 million cumulative losses. As well as access to the defaulting participants collateral, NGX has the following protections (i) daylight facility of CDN $300 million (ii) NGX cash reserves of CDN $ 10 million and (iii) NGX emergency fund via LOC with CIBC Mellon of CDN $30 million.