| ANR Pipeline Co., a unit of El Paso Corp., operates an interstate natural gas
pipeline system with one leg originating in southern Louisiana, drawing on the
prolific gas resources of the Gulf of Mexico, while the other originates in southern
Kansas and the panhandles of Texas and Oklahoma, both delivering gas to the Great
Lakes region of the Midwest.
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 an ANR Louisiana basis swap futures contract.
The final settlement is calculated as the Platts Inside FERC's Gas Market
Report ANR Louisiana index price minus the final settlement price of the
Exchange's benchmark natural gas futures contract for the corresponding month
on the last trading day. Platts Inside FERC calculates the ANR Louisiana
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 will be 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. |