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| Michigan Consolidated Gas Co. (MichCon) Basis Swap Futures (Platts IFERC) |
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Michigan Consolidated Gas Co. (MichCon) is a natural gas utility serving 1.2 million customers in a 14,700-square-mile service area in Michigan, and delivers more than 600 billion cubic feet of gas per year to customers across North America. MichCon is an operating subsidiary of DTE Energy, which is also the parent company of Detroit Edison, an investor-owned electric utility serving 2.1 million customers in southeastern Michigan.
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., Henry Hub natural gas futures contract, which has evolved into the benchmark for forward natural gas markets industry-wide because of its liquidity and transparency.
To help market participants offset their price risk in this major market center, the Exchange provides a MichCon natural gas basis swap futures contract. The final settlement is calculated as Platts Inside FERC's Gas Market Report Upper Midwest MichCon citygate index price, which represents deliveries to MichCon at all its gate stations minus the final settlement price of the Exchange's benchmark Henry Hub natural gas futures contract for the corresponding month. Platts Inside FERC calculates the MichCon citygate index price from its monthly bid week survey of buyers and sellers of base-load gas.
The lot size of 2,500 million Btus represents a commonly traded market unit and is one-quarter of the size of the Henry Hub futures contract, giving market participants additional flexibility in managing price risk. The contract, which must be traded as a multiple of the number of calendar days in the month, is available for trading on the NYMEX ClearPortsm trading platform.
All positions will be aggregated and margined according to the value at risk as calculated by the SPAN® system. Cross margining of offsetting positions across markets can result in reduced margin obligations. |
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