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| Kern River Basis Swap Futures (Platts IFERC) |
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The Kern River pipeline system brings gas from the Rocky Mountain deposits in Wyoming and Colorado to western markets in Utah, Nevada, and California.
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 Kern River basis swap futures contract. The final settlement is calculated as the Platts Inside FERC's Gas Market Report Kern River Transmission Wyoming 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 Kern River index price from its monthly bid week survey of buyers and sellers who are shipping base-load gas on the pipeline.
In addition to the basis swap futures contracts, the Exchange offers swing swap futures contracts that let market participants fine tune their risk management strategies.
Swing swap futures contracts are also offered and help market participants manage their price risk with greater precision. The financially settled daily swing swap futures contract settles against the Platts Gas Daily index price at a specific location. There is a contract for every calendar day, or "flow date."
The lot size of 2,500 million Btus represents a commonly traded market unit that is one-quarter of the size of the Henry Hub futures contract, giving market participants additional flexibility in managing price risk. The contract must be traded as a multiple of the number of calendar days in the month.
The basis and swing swap contracts are all available for trading on the NYMEX ClearPort® trading platform or can be submitted solely for clearing.
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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