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| Northwest Pipeline Corp. Rockies Basis Swap Futures (Platts IFERC) |
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Williams Companies' Northwest Pipeline system draws on natural gas supplies in the Rocky Mountain region and supplies it to consuming markets throughout the Rockies and Pacific Northwest.
The southern terminus of the Northwest Pipeline system is the natural gas reserves in southwestern Colorado. The system also draws on other Rocky Mountain gas-producing areas clustered in nearby areas of Colorado, Utah, and Wyoming.
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. The Henry Hub futures contract is the benchmark for forward natural gas markets industry-wide because of its liquidity and transparency.
To help market participants offset their price risk between the market centers; the Exchange provides a Northwest Pipeline Corp. Rockies basis swap futures contract. The final settlement is calculated as the Platts Inside FERC's Gas Market Report Northwest Pipeline Rocky Mountain Index minus the final settlement price of the Exchange Henry Hub natural gas futures contract for the corresponding month on the last trading day.
In addition to the basis swap futures contracts, the Exchange offers index swap futures contracts that let market participants fine tune their risk management strategies.
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.
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 index 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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