Recent innovations in information and communication technologies (ICT) provide new opportunities and challenges for the integration of distributed energy resources (DERs) into the energy supply system as active market players. By increasing the integration of DERs, the novel market platform should be designed for these new market players to provide correct incentives for them to join the market and follow market rules. In this paper, a feeder‐based market is proposed for local energy trading among prosumers and consumers in the distribution system to share energy with other players in the local market and with neighbourhood areas. A two‐step market clearing (2SMC) mechanism is proposed for market clearing, in which in the first step, each local market is cleared independently to determine the market clearing price and in the second step, players can trade energy with neighbourhood areas. In comparison to a centralised market, the proposed method is scalable and reduces computation overheads, because instead of clearing market for a large number of players, the market is cleared for a fewer number of players. Case studies demonstrate the efficiency and effectiveness of the proposed market clearing method in increasing social welfare and reducing computation time.