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| Texas Eastern Transmission Co. (Tetco) South Texas Basis Swap (Platts IFERC) |
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The Texas Eastern Transmission Co. South Texas zone consists of two pipelines, one running from the Texas-Mexico border, paralleling the Gulf Coast and passing east of Houston to a point north of the city in Orange County, just west of the Louisiana state line. The other pipeline extends from Duval County in the southern part of the state, passing west of Houston and terminating at Huntsville, north of Houston. Pricing in Tetco's South Texas zone mostly reflects production around Corpus Christi, although it includes offshore gas and there are pipeline connections to the Mexican state oil company, Petroleos Mexicanos.
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 Tetco South Texas index natural gas basis swaps futures contract. The final settlement is calculated as Platts Inside FERC's Gas Market Report Tetco South Texas 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.
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 ClearPortsm 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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