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Nasdaq says more than 90 percent of commodity clearing buffer restored

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OSLO (Reuters) – Members of Nasdaq’s Nordic commodities exchange have replenished more than 90 percent of clearing house contingency funds that were lost last week when a private Norwegian trader defaulted during a spike in market volatility, the exchange operator said.

Energy firms and other players on the 166-member market have been given until the end of Monday to plug the 114 million euro (£101.7 million) hole left by the losses of electricity derivatives trader Einar Aas, or themselves face default.

“Nasdaq would like to inform our members and clients that the Member Default Fund has more than 90 percent committed funds for recapitalisation. We have no indication that any member will not replenish the default fund by the end of the day,” it said.

Clearing houses like the one operated by Nasdaq are vital for the stability of markets, acting as an intermediary in stock, bond or derivatives transactions and ensuring completion if one side goes bust.

While Aas had bet that Nordic-German spreads would narrow, this backfired on Sept. 10 as heavy rain pushed down prices in the hydroelectric-dependant Nordic region, while a spike in the cost of carbon drove up German prices, Nasdaq said.

In a single day, the difference between Nordic and German power prices for 2019 widened by 5.56 euros, 17 times more than the average daily move and exceeding the maximum level of 4 euros that Nasdaq Clearing’s risk model had been calibrated for.

Since 2011, when the current pricing system was set up, the largest change in Nordic-German spreads on any single day had been 1.6 euros, Nasdaq said, calling the Sept. 10 market move “a true ‘Black Swan’ event.”

(Reporting by Terje Solsvik; Editing by Ole Petter Skonnord and Mark Potter)

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