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| Panhandle Basis Swap Futures (Platts IFERC) |
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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 Mid-Continent region.
The volatility of natural gas prices has given rise to a basis market that is quoted as a differential between the Panhandle Eastern Pipeline Co. delivery point and 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 better help market participants offset their price risk between the market centers; the Exchange provides a Panhandle basis swap futures contract. The final settlement is calculated as the Platts Inside FERC's Gas Market Report Panhandle Eastern Pipe Line Co. Texas-Oklahoma (mainline) Index minus the final settlement price of the NYMEX Division Henry Hub natural gas futures contract for the corresponding month on the last trading day.
The lot size of 2,500 million Btus represents a commonly traded market unit and is one-quarter the size of the Henry Hub futures contract, giving market participants additional flexibility in managing price risk. The contract must be traded in a multiple of the number of calendar days in the month.
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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