NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Years ended December 31, 2005 and 2004 (in thousands of dollars, except per share amounts)

9. NGX COLLATERAL ARRANGEMENTS AND CLEARING BACKSTOP FUND:

As part of its clearing operations, NGX becomes the counterparty to each transaction, thereby guaranteeing the fulfillment of every contract that is executed on its electronic trading platform. To manage the risks associated with its clearing activities NGX is fully collateralized by the counterparty and maintains a $30,000 clearing backstop fund. The Company is the guarantor of this fund, and has pledged $30,000 of marketable securities related to its obligations as guarantor.

NGX requires each counterparty (the "Contracting Party") to provide collateral in the form of cash or letters of credit based on the magnitude of its unsettled contractual obligations which may be accessed in the event of default by a Contracting Party. The collateral provided in the form of cash ("the cash collateral deposits") is segregated in individually designated bank accounts held at a major Canadian chartered bank by NGX which acts as trustee for these funds. The collateral deposits, together with letters of credit provided by all the Contracting Parties, exceed all of the outstanding credit exposure, as determined by NGX, for all its unsettled contractual obligations at any time.