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| Florida Gas Transmission Zone 3 Basis Swap |
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Florida Gas Transmission operates an interstate natural gas pipeline running approximately 5,000 miles from south Texas to south Florida with mainline capacity of 2.1 billion cubic feet per day. The line serves the rapidly growing areas of peninsular Florida; customers include electric utilities, independent power producers, cogeneration facilities, municipal generators, and local distribution companies. The pipeline has extensive access to diverse natural gas supplies, including the offshore Gulf of Mexico.
The volatility of natural gas prices has given rise to a basis market that is quoted as a differential to the price of the New York Mercantile Exchange, Inc., natural gas futures contract which has evolved into the benchmark for forward natural gas markets industry-wide due to its liquidity and transparency.
To better help market participants offset their price risk in this major market center, the Exchange provides a Florida Gas Transmission Zone 3 basis swap futures contract. The final settlement is calculated as the Platts Inside FERC Gas Market Report Florida Gas Transmission Co. Zone 3 index minus the final settlement price of the Exchange's benchmark natural gas futures contract for the corresponding month on the last trading day. Inside FERC calculates the Florida Gas Transmission index price from its monthly bid week survey of buyers and sellers who are shipping base-load gas on the pipeline.
The contract size of 2,500 million Btus represents a commonly traded market unit and is one-quarter of the size of the natural gas futures contract, giving market participants additional flexibility in managing price risk. The contract must be traded in a multiple of the number of calendar days in the month.
All positions are aggregated and margined according to the value at risk as calculated by the SPAN® system. Cross margining offsetting positions across markets can reduce margin obligations. |
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