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Glossary

Term	Definition
Broker	An entity that submits bilateral OTC transactions for clearing on behalf of participants. The broker must have a signed agreement in place with the participant in order to enter the trade.
CAISO	The California ISO is the ISO that operates the wholesale electricity market and administers the transmission grid for the majority of California.
Cash Settled	A transaction settled with a cash payment in the amount of profit or loss rather than the physical delivery of the underlying commodity. Nodal Exchange only offers cash settled instruments for trading, referred to as financial contracts.
Class	The contract characteristic that defines what hours of the month are captured in the contract. At Launch, Nodal Exchange will be supporting two contract classes, on-peak and off-peak, which are currently defined according to the specifications of the RTO/ISO in which the contract node is located.
Clearing House	The Central Counterparty (CCP) for all Nodal Exchange transactions. The Clearing House eliminates counterparty credit risk through a process called novation. Only members of the Clearing House may submit trades for clearing. Non-Clearing Participants need to submit trades through a General Clearing Member. The Clearing House collects initial margins on all open positions from the Clearing Members and settles mark-to-market profits and losses in cash every day.
Commodity	The goods or services market underlying the financial contract being traded, independent of location, contract month, and term. At Launch, Nodal Exchange will support one commodity, namely the locational marginal price (LMP) of power determined in the Day Ahead markets for each Node.
Congestion Price	The price component of the LMP that reflects the relative constraints on the transmission network to deliver electricity to a particular node exclusive of energy and losses.
Contract	An agreement to buy or sell a commodity based on type, node, class, and term. A cash settled contract, also known as financial contract, defines the instruments being traded on Nodal Exchange.
Contract Node	This is the component of the contract that specifies the geographic location or node(s) that the contract will settle against at expiry. Nodes that have shown highly correlated pricing behavior in the past will be grouped into a single Contract Node.
Credit Risk	Credit risk is the risk of loss due to a counterparty's non-payment of their financial obligation. The Clearing House mitigates this risk by becoming the counterparty of every trade.
Daily Settlement Price	This is the end of day price the exchange supplies to the Clearing House on every trading day. Nodal Exchange will provide a Daily Settlement Price for all contracts offered on the exchange on every trading day.
Day Ahead Market	The daily market employed in ISO/RTO territories in which generators, load serving entities, and financial traders bid and offer electricity for every hour of the next day for all nodal locations. For each node that is traded and for every hour of the day, three components of total LMP or power price are produced: energy, congestion, and loss. The Day Ahead power (LMP) hourly prices represent the commodity traded in the Nodal Exchange monthly Day Ahead settled contracts.
Eligible Commercial Entity	An entity that is an Eligible Contract Participant (ECP) has a demonstrable ability to make or take delivery of an underlying commodity; incurs risks related to the commodity, in addition to price risk; or is a dealer that regularly provides risk management, hedging services, or market-making activities to entities trading commodities or derivative agreements, contracts, or transactions in commodities. Or an Eligible Commercial Entity (ECE) can be a non-government ECP transacting in the commodity or its derivative agreements in a collective investment vehicle having an aggregate of $1 billion in total assets; or $100 million in total assets if the investing participants are 'qualified eligible persons,' 'accredited investors' with total assets of $2 million, or 'qualified purchasers.'
Eligible Contract Participant	For the purpose of identifying an ECE, an ECP is an entity that is either a financial institution; insurance company; investment company (subject to the Investment Company Act 1940); commodity pool with $5 million in total assets managed by 'commodity pool operator' or 'commodity trading advisor'; employee benefit plan with $5 million in total assets or managed by an investment advisor, 'commodity trading advisor,' financial institution, or insurance company; government entity; broker, dealer, 'associated person,' or investment bank holding company; 'futures commission merchant'; floor broker or trader; an entity with $10 million total assets, or $1 million net worth entering transactions to manage related commercial risks.
Energy Price	The price component of LMP that reflects the average or marginal price of generating electricity across an individual electricity market (RTO/ISO). Note that by convention, the energy component of power prices is the same for all nodes within an RTO/ISO.
ERCOT	The Electric Reliability Council of Texas (ERCOT) is the ISO that operates the wholesale electricity market and administers the transmission grid for the large majority of the state.
Final Settlement Price	This is the price that Nodal Exchange contracts will be settled against after contract expiry. Specifically, for Nodal Exchange, a contract's Final Settlement Price will be the simple average of the on-peak or off-peak hourly prices for the contract's nodal location(s) and term.
FTR (Financial Transmission Rights)	Financial instruments offered by the RTO/ISO markets. An FTR entitles the holder to a stream of revenues (or charges) based on the Day Ahead hourly congestion price difference across the transmission path.
General Clearing Member (GCM)	A member of the Clearing House that is eligible to submit proprietary and client business to the Clearing House for clearing. Non-Clearing Participants (NCPs) need a clearing agreement with a GCM on Nodal Exchange to trade Nodal Exchange contracts.
Hub	An aggregation of generator and load nodes that is traded as a single contract node.
IESO	The Independent Electricity System Operator is the ISO that operates the wholesale electricity market and administers the transmission grid for Ontario.
Individual Clearing Member (ICM)	A member of the Clearing House that is only eligible to clear proprietary business.
Initial margin	The earnest money required to open or hold a particular position or portfolio. The Clearing House uses a Value at Risk (VaR) methodology to calculate initial margins with the goal of covering two days of expected losses on the portfolio under normal market conditions. Clearing Members deposit initial margins for the proprietary and client portfolios with the Clearing House and in turn charges Participants initial margins on their respective portfolios. General Clearing Members can charge clients a different initial margin from the one charged by the Clearing House at their discretion.
ISO - NE	ISO New England is the ISO that operates the wholesale electricity market and administers the transmission grid in New England.
ISO / RTO	Independent System Operators (ISO) / Regional Transmission Organizations (RTO). These organizations are charged with administering the transmission grid and wholesale electricity markets on a regional basis throughout North America.
Launch	The formal initiation of active trading on Nodal Exchange, scheduled for early 2009.
LMP (LBMP)	Locational marginal price (or locational based marginal price in NYISO) is the total price of power at each node in RTO electricity markets in the US. Expressed in $ per MWHr, the LMP is composed of three parts: energy, congestion, and loss.
Loss Price	The price component of LMP that reflects the cost of transmission losses associated with the delivery of electricity to each node in the market.
Lot	A lot represents the minimum trading unit of a futures contract. On Nodal Exchange, the lot size depends on the month, class (on-peak or off-peak) and ISO of the contract. 1 lot represents 1 MW times the number of hours in the particular class, ISO and month of the contract.
Margin	Nodal Exchange distinguishes between two types of margins: initial margins and variation margins. Initial margin denotes the earnest money required to hold a particular position or portfolio. Variation margin is the mark-to-market profit and loss which the Clearing House settles daily with its clearing members in cash.
MISO	The Midwest ISO is the RTO that operates the wholesale electricity market and administers the transmission grid in the Upper Midwest and Manitoba, Canada.
Node	In a nodal electricity market, the physical location on a transmission grid where electricity is delivered or withdrawn. Node can designate one such location, or groups of such locations designated as hubs or zones.
NYISO	New York ISO is the ISO that operates the wholesale electricity market and administers the transmission grid in New York.
Off - Peak	The contract class that refers to the off-peak hours within a contract period as defined by the relevant RTO/ISO. These are generally 8 night hours on business days and all hours on holidays or weekend days.
On - Peak	The contract class that refers to the on-peak hours within a contract period as defined by the relevant RTO/ISO. The on-peak period is currently defined as 16 day and evening hours on business days.
Order - Aggregate	Any order that includes contracts and expiries across multiple nodal locations
Order - Locational Spread	An order that includes a long position on a contract for a given expiry, and a short position on a separate contract for a given expiry. This order is valued at the price difference between the two expiries
Order - Multiperiod	Any order that includes contracts that expire in multiple time periods
Order - Outright	Bid or Offer: an order that includes only long or short positions. These orders are distinct from spread bids, because they set prices for expiries directly, rather than defining relationships between prices.
Order - Spread	A spread is a position involving 2 legs. Typically one of the legs is bought, the other sold, exposing the trader to the difference in price between the legs. There are various types of spreads - on Nodal Exchange, Participants can order locational (nodal) spreads and temporal (calendar) spreads.
Order - Temporal Spread	An order that includes a long position on a contract for a given expiry, and a short position on a contract in a different expiry. This order is valued at the price difference between the two expiries
Order Slate	An order slate is a collection of orders, both bids and offers, for batch submission to an auction.
OTC Trade	A negotiated over-the-counter (OTC) trade between two counterparties that is submitted by a broker, or by each of the counterparties separately, to the Nodal Exchange platform for clearing.
Participant	A member of Nodal Exchange who has signed a Participant Agreement with the Exchange. Both Clearing Members and Non-Clearing Participants on Nodal Exchange are required to sign the Participant Agreement.
PJM	The RTO that operates the wholesale electricity market and administers the transmission grid in the Mid-Atlantic region and beyond, including 13 states and the District of Columbia. The name stems from the original power pool that covered Pennsylvania, New Jersey, and Maryland.
Real Time Market	The daily market employed in ISO/RTO territories in which generators, load serving entities, and financial traders bid and offer electricity for every hour of the current day for all nodal locations and settle deviations from Day Ahead market volume at the Real Time LMP. For each node that is traded and for every hour of the day, three components of total LMP or power price are produced: energy, congestion, and loss. The Real Time power (LMP) hourly prices represent the commodity traded in the Nodal Exchange monthly Real Time settled contracts.
SPP	The Southwest Power Pool is the RTO that operates the wholesale electricity market and administers the transmission grid in all of Oklahoma and Kansas and portions of New Mexico, Texas, Missouri, Arkansas, and Louisiana.
Term	The duration of a contract. This determines the amount of time included during valuation at settlement. Only monthly contracts will be offered on Nodal Exchange at Launch.
Value at Risk	Value at Risk (VaR) is a common risk management tool. The Value at Risk, or VaR, is the maximum loss not exceeded with a given probability defined as the confidence level, over a given period of time. The Clearing House uses a VaR algorithm to calculate initial margin requirements for Nodal Exchange portfolios
Variation Margin	The mark to market profits and losses, which the Clearing House settles with Clearing Members in cash on a daily basis. For the purpose of calculating variation margins, the Clearing House does not distinguish between realized and unrealized profits and losses. This ensures that losses do not accumulate over time.
Zero Capacity Auction	An auction based on the central constraint that net volume is zero - for every buyer there is a seller.
Zone	An aggregation of all the load nodes within a distinct geography. Typically, zones represent the old utility territories.