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| Dominion Transmission Inc. – Appalachian Swap Futures (Platts IFERC) |
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Dominion Transmission, Inc., is the interstate gas transmission subsidiary of Dominion. Primarily a provider of gas transportation and storage services, Dominion Transmission, operates the world's largest underground natural gas storage system. The company has links to other major pipelines and to markets in the Midwest, Mid-Atlantic, and Northeast regions of the United States. Dominion Transmission maintains 10,000 miles of pipeline in Ohio, West Virginia, Pennsylvania, New York, Maryland, and Virginia.
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 Dominion Transmission Appalachia index natural gas basis swap futures contract. The final settlement is calculated as Platts Inside FERC's Gas Market Report Dominion Transmission Inc. Appalachia 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.
In addition to the basis swap futures contracts, the Exchange offers index swap futures and swing 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.
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, index, 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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