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| Panhandle Natural Gas Index Swap Futures |
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The Panhandle Eastern Pipe Line Co. operates a major interstate pipeline system delivering natural gas to the Midwest and East Coast markets. The prolific gas production of the Texas-Oklahoma panhandle region is a major supply source for Panhandle Eastern and other interstate pipelines taking gas to the Midcontinent region. The demand for physical gas in this market can quickly change in response to swings in weather or other factors.
To help market participants cope with the volatility that often extends into the delivery month while, at the same time, enabling market participants to take advantage of the financial protection of the New York Mercantile Exchange clearinghouse, the Exchange offers a Panhandle natural gas index swap futures contract as 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.
Index swap futures are 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.
The lot size of 2,500 million British thermal units (mmBtu) represents a commonly traded market unit and is one-quarter of the size of the benchmark natural gas futures contract, giving market participants additional flexibility in managing price risk. The index swap futures contract is available for trading on the NYMEX ClearPortsm trading platform or can be submitted through the system solely for clearing.
Positions are 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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