ERCOT Report on NPRR1112 - Reduction of Unsecured Credit Limits
ERCOT's report on NPRR1112 discusses the impact of the CFTC RTO/ISO Exemption Order of March 2013 on the use of unsecured credit by ISO/RTOs, including the disallowance of unsecured credit to cover credit exposure from CRRs/FTRs and the reduction of caps on unsecured credit limits. The report also highlights the current unsecured credit limits by Counter-Party at various ISO/RTOs and the absence of aggregate caps on the amount of unsecured credit outstanding. Additionally, it addresses the consideration of affiliate guaranty as a form of unsecured credit and the maximum amount of unsecured credit obtainable by corporate families and market participants.
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Item 3: ERCOT Report on NPRR1112, Reduction of Unsecured Credit Limits Mark Ruane Senior Director, Settlements, Retail and Credit TAC ERCOT Public May 25, 2022
ERCOT Report on NPRR1112, Reduction of Unsecured Credit Limits All ISO/RTOs currently offer unsecured credit. Use of unsecured credit by ISO/RTOs was impacted by the CFTC RTO/ISO Exemption Order of March 2013. The Order exempted ISO/RTOs from certain provisions of the Commodity Exchange Act that provided the CFTC with jurisdiction over derivatives transactions. With respect to unsecured credit, the exemption: Disallowed the use of unsecured credit to cover credit exposure from CRRs/FTRs. Reduced caps on unsecured credit limits to no more than $50 million per Counter-Party. 2 ERCOT Public
ERCOT Report on NPRR1112, Reduction of Unsecured Credit Limits Unsecured credit limits are by Counter-Party. There are no aggregate caps on the amount of unsecured credit outstanding at an ISO/RTO. Total unsecured credit amounts at other ISO/RTOs apparently range from approximately $100 million to $1.75 billion. ERCOT has approximately $1.4 billion outstanding. Outside of the ISO/RTO sector, we have not identified exchanges / central counterparties offering unsecured credit. 3 ERCOT Public
ERCOT Report on NPRR1112, Reduction of Unsecured Credit Limits Do you consider an affiliate guaranty a form of unsecured credit? What is the maximum amount of unsecured credit any corporate family can obtain? If you do not allow unsecured credit and guarantees in the markets how long has that policy been in place? What is the maximum amount of unsecured credit any one MP can obtain? Do you allow for unsecured credit? What markets/products cannot utilize unsecured credit? Do you allow guarantees? Entity Other information Yes - foreign and domestic ERCOT Yes Yes $50,000,000 $50,000,000 CRR N/A Yes - foreign and domestic CAISO Yes Yes $50,000,000 $50,000,000 CRR N/A ISO-NE buys credit insurance on behalf of all the participants that have unsecured credit limits. ISO-NE Yes No No $50,000,000 $50,000,000 FTR 6-7 years Yes - foreign and domestic MISO Yes Yes $50,000,000 $50,000,000 FTR N/A 4 ERCOT Public
ERCOT Report on NPRR1112, Reduction of Unsecured Credit Limits Do you consider an affiliate guaranty a form of unsecured credit? What is the maximum amount of unsecured credit any corporate family can obtain? If you do not allow unsecured credit and guarantees in the markets how long has that policy been in place? What is the maximum amount of unsecured credit any one MP can obtain? Do you allow for unsecured credit? What markets/products cannot utilize unsecured credit? Do you allow guarantees? Entity Other information For unrated companies, upon request the NYISO will calculate an equivalent rating from financials. The NYISO also has a credit scoring tool that may increase or decrease the amount allowed $50,000,000 - lower amounts depending on credit rating $50,000,000 - lower amounts depending on credit rating Yes - domestic and Canadian TCC and Projected True-Up Exposure NYISO Yes Yes $50,000,000 N/A For unrated companies, they calculate an equivalent rating from financials. Probably 8-10 years PJM Yes Yes Yes $50,000,000 FTR Yes - foreign and domestic SPP Yes Yes $50,000,000 $50,000,000 CRR N/A 5 ERCOT Public
ERCOT Report on NPRR1112, Reduction of Unsecured Credit Limits Do you consider an affiliate guaranty a form of unsecured credit? What is the maximum amount of unsecured credit any corporate family can obtain? If you do not allow unsecured credit and guarantees in the markets how long has that policy been in place? What is the maximum amount of unsecured credit any one MP can obtain? Do you allow for unsecured credit? What markets/products cannot utilize unsecured credit? Do you allow guarantees? Entity Other information Futures, options, OTC & Physicals - NYSE market ICE No N/A No $0 $0 N/A N/A Futures, options, equity, foreign exchange, Energy, agricultural products and metal - CME, CBOT, NYMEX, COMEX markets CME Group No N/A No $0 $0 N/A N/A Futures, options, derivatives, equities, commodities, fixed income NASDAQ No N/A No $0 $0 N/A N/A 6 ERCOT Public
ERCOT Report on NPRR1112, Reduction of Unsecured Credit Limits Questions 7 ERCOT Public
