February 2006 Market Clearing in the Energy Industry 66 © Copyright 2006, CCRO. All rights reserved. is passed through daily via the Bank of New York accounts. Therefore, VMAC covers both delivery risk (up to counterparty VaR and MTM) and reduces to one-day’s A/R the payment risk for both parties up to the close of the day prior to the default. The collateral required to support these risks is calculated on a fully netted basis, extending the benefit of multilateral netting through the delivery and settlement periods. VMAC’s list of product types is diverse and flexible. Its only product limits will be based on data limitations on historical data and forward price curves. Fees for products will vary based on contract value and duration, and will be negotiated with each participant. 12.6. The Natural Gas Exchange (NGX) Incorporated in 1993, Natural Gas Exchange Inc. (“NGX”) owns and operates an electronic exchange and clearing facility for natural gas physical and financial forward contracts, and for electric power financial forward contracts. As a private, for-profit exchange and clearing operation headquartered in Calgary, Alberta, Canada, NGX has developed products and customers in Canada and the United States. The regulatory status that allows NGX to operate is fundamentally predicated on the concepts of “Eligible Commercial Entity”, “Eligible Contract Participant”, and “Eligible Swap Participant”, providing for protections under bankruptcy law in Canada. NGX presently offers nearly 15 physical gas contracts, and nearly 15 financial gas contracts and two financially settled power contracts settled against delivery locations in the USA and Canada. NGX utilizes a margining system with collateral in liquid form. Prior to initiating or increasing exposure with NGX, collateral must be posted. If the margin requirements reach 80% of the collateral, NGX will initiate a margin call. If margin requirements reach 90% of the collateral, NGX is entitled to halt the ability to incur new positions. Once the margin requirements reach 95% of the collateral, NGX has the right to invoke a liquidation procedure to reduce the exposure below 80%. Cost of service is a subscription fee of $1,500/month per legal entity as well as fees of 0.00075/Mmbtu for physical and 0.0005 MMBtu for financial trades.