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| Northwest Pipeline, Sumas, Washington, Swap Futures (Platts IFERC) |
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The Williams Companies Northwest Pipeline system which draws on natural gas supplies throughout the Rocky Mountain region, also connects with Westcoast Gas Transmission, Ltd., of British Columbia to take advantage of Canadian gas. Northwest connects with Westcoast Transmission at Sumas, Washington, on the U.S.-Canadian border, which is also an important pricing point.
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 Northwest Pipeline Sumas natural gas basis swap futures contract. The final settlement is calculated as Platts Inside FERC's Gas Market Report Northwest Pipeline Corp. Canadian border index minus the NYMEX Division Henry Hub natural gas futures contract final settlement price for the corresponding contract month. Platts Inside FERC calculates the index price from its monthly bid week survey.
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 Sumas 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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