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| Malin Swap Futures (NGI) |
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The Pacific Gas & Electric Co. is one of the largest suppliers of natural gas in California, with a pipeline network that traverses the state. A subsidiary, California Gas Transmission (CGT), enters California at Malin, Oregon, on the California-Oregon border. CGT connects with the Northwest Pipeline Corp., which carries gas from the Rockies, and with the British Columbia pipelines at the U.S.-Canadian border.
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 PG&E Malin natural gas basis swap futures contract. The final settlement is equal to the bid week price (average) for Malin under the California heading found in the Natural Gas Intelligence bid week survey minus the NYMEX Division Henry Hub natural gas futures contract final settlement price for the corresponding contract month.
Index swap futures contracts are part of the evolution of the modern natural gas markets. The NYMEX Division natural gas futures contract, the industry pricing benchmark, sets the anchor for all other trading strategies particularly those for hedging location basis differentials.
The index swap futures contract is a financially settled monthly contract that captures the differential of the daily market fluctuations during the delivery month as reported by Platts Gas Daily against the bid week price which is determined in the last days of the prior month and is reported by Platts Inside FERC. The bid week price reflects what is expected to happen during the delivery month; the daily price is what actually happens.
Swing swap futures contracts are also offered and help market participants manage thier 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 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 ClearPort® 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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