Probe Pledged on Why Nordic Power Whale Able to Clear Own Trades

(Bloomberg) -- Sweden’s financial regulator on Friday vowed to investigate how a Nordic power trader that this week racked up huge losses and barred by Nasdaq Inc. was able to act as his own clearer, or guarantor of trades.

“This is a question that Nasdaq Clearing has to answer,” Daniel Gedeon, director of financial markets infrastructure supervision at the Swedish Financial Supervisory Authority, said by email. “As a supervisor we are investigating the situation thoroughly, both when it comes to fulfilling the criteria and the criteria in themselves.”

The portfolio of the private trader, Einar Aas, who had been active in the market for almost two decades, was liquidated on Wednesday night after his losses on the spread between Nordic and German power contracts. Other companies on the exchange will now have to pitch in to cover the losses for the central clearing house’s default fund, which amounted to 107 million euros ($125 million).

Asked what the FSA is doing to ensure that something similar doesn’t happen again, Gedeon said “we have a close ongoing supervision of Nasdaq Clearing” but that it is “too soon to make any conclusions about possible future actions at this point.”

The authority won’t comment “beforehand on actions that we take or might take in relation to individual entities under our supervision,” Gedeon said.

Finnish utility Fortum Oyj said Friday it will pay 20 million euros into the exchange’s clearing default fund, while Norway’s Statkraft SF will pay 5 million euros.

Nasdaq Clearing didn’t immediately respond to requests for comment. The exchange said in a separate statement Friday it would introduce changes after Aas’s default. Nasdaq’s clearing house will set up a “Temporary Junior Capital” fund of 19 million euros to help cover future defaults.

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