Products

Definition

Contracts on Natural Gas and Liquefied Natural Gas, futures and day-aheads, registered in the CCP are Market and OTC transactions.

Both cases are agreements between two parties to buy or sell a specific quantity of gas on a future date at a fixed price.

The CCP provides a mechanism that guarantees the successful completion of operations for both counterparties. To facilitate trading, standard characteristics for contracts are specified.

How are they used?

There are three different types of trading strategies:

• Hedging: these contracts are a tool for managing price risk. Buyers and sellers can hedge spot market positions against adverse price movements, mitigating or eliminating market risk. Hedging entails taking a forward position that offsets an existing position and may be total or partial.
• Speculation: here the idea is to take on market risk in order to generate a profit by correctly betting on future price trends.
• Arbitrage: this strategy entails simultaneous trading in various instruments in order to leverage temporary price distorsion. 

The existence of market participants with differing trading interests in respect of these contracts bolsters market liquidity and efficiency.

Features

The underlying asset of all types of Natural Gas Contracts is the ownership of Natural Gas at the Virtual Balancing Point, whose acquisition or disposal is carried out through a valid Notification of the transfer of ownership under the terms provided in the gas system regulations, which constitutes the object of Contracts with physical delivery on Gas.

The underlying asset of all types of Liquefied Natural Gas Contracts is the ownership of Liquefied Natural Gas at the Virtual Balancing Tank, whose acquisition or disposal is carried out through a valid Notification of the transfer of ownership under the terms provided in the gas system regulations, which constitutes the object of Contracts with physical delivery on Gas.

The Delivery Point or Tank of Natural Gas and Liquefied Natural Gas contracts is the virtual exchange area of the gas transport network where ownership transfers are carried out in the Spanish Gas System.

The registration unit is 1MWh/day (tick).¹

The nominal or contract multiplier is established in MWh/d according to the formula:

Natural Gas

MWh/day * Number of contract days

Liquefied Natural Gas

MWh/day * the contract delivery day

The contract price is in Euros per MWh/d, with a maximum of 2 decimals.²