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| Tennessee 500 Leg Basis Swap Futures (Platts IFERC) |
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The Tennessee Gas Pipeline, which stretches from the Texas-Mexico border and the Gulf Coast north into New England, draw supplies from the onshore gas fields of east Texas.
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., natural gas futures contract which has evolved into the benchmark for forward natural gas markets industry-wide due to its liquidity and transparency.
To better help market participants offset their price risk in this major market center, the Exchange provides a Tennessee 500 leg basis swap futures contract. The final settlement is calculated as the Platts Inside FERC's Gas Market Report Tennessee 500 leg index price minus the final settlement price of the Exchange's benchmark natural gas futures contract for the corresponding month on the last trading day. Platts Inside FERC calculates the Tennessee 500 leg index price from its monthly bid week survey of buyers and sellers who are shipping base-load gas on the pipeline.
The contract size of 2,500 million Btus represents a commonly traded market unit and is one-quarter of the size of the natural gas 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 offsetting positions across markets can reduce margin obligations. |
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