The natural gas futures contract is a standardised and centrally cleared financial contract structured as cash-settled contracts for difference (CFD) against a relevant natural gas reference price.
The natural gas futures contract provides a robust mechanism for companies with interest in or exposure to the natural gas market to anonymously manage their gas price risk and counterparty credit risks.
Benefits of trading ASX Victorian wholesale gas futures
ASX Victorian wholesale gas futures provide market users with:
- a transparent forward price curve that can be referenced for investment, trading and risk management purposes;
- an Exchange for physical (EFP) mechanism that accommodates the exchange of OTC swaps and options for futures contracts and options (or vice versa);
- a Block trading mechanism that enables market participants to bi-laterally arrange large transactions (five lots or greater);
- ease of access to hedging and trading strategies;
- simplified contractual arrangements that preclude the need to negotiate ISDA agreements with new counterparties;
- the effective mitigation of counter-party credit exposure through the largest futures clearing house (by value of trade) in the Asia Pacific;
- hedge cover for new entrants and a new asset class for financial market participants seeking diversity in their commodity portfolios;
- synergies with existing and forthcoming energy and environmental product markets at ASX;
- seamless integration with existing financial institutions and brokers that already service the Australian and broader global energy and environmental markets; and
- opportunities to pursue arbitrage plays against existing OTC and exchange-traded energy products.
Product key features
- Contract references the beginning of day (6am) price for the Victorian wholesale gas market;
- Cash settled - against the arithmetic average of the beginning of day (6am) prices in the Victorian wholesale gas market over the period of a calendar quarter;
- Contract size - 100GJ/day over a calendar quarter;
- Minimum block trade threshold of five lots;
- Quarterly futures and strips out to two calendar years;
- AUD currency denomination; and
- Alternative asset class for financial institutions and trading houses with existing energy trading desks or gas market exposure.
How is the market used?
Market users may wish to:
- hedge their particular market exposure or financing risk;
- mitigate counterparty credit exposure within their existing portfolio;
- speculate on the price direction or price correlation of a commodity/commodities;
- arbitrage OTC and futures markets;
- implement sophisticated spark-spread strategies; and
- gain exposure to a new asset class.
ASX Victorian wholesale gas futures are not suitable for all traders and investors. Before trading ASX Victorian Wholesale Gas Futures, you should carefully assess your experience, investment objectives, financial resources and other relevant considerations and consult your licensed financial services adviser. In particular, you should understand the implications of leverage, additional margin calls and unlimited losses on your investments.