ICE to launch futures on Natural Gas Storage Inventories
New U.S. EIA Financial Weekly Index Futures
Effective on trade date February 3, 2014, ICE Futures U.S. will list U.S. EIA Financial Weekly Index futures contracts. The new contract is based on the change in working natural gas volumes published by the U.S. Energy Information Administration in its Weekly Underground Natural Gas Storage Inventory Report (“EIA Report”)
The EIA Report provides a weekly estimate, in billion cubic feet (“BCF”), of the working natural gas volume held in underground storage facilities across the United States. It is posted on the U.S. Energy Information Administration’s website at 10:30 a.m. every Thursday, except for certain Federal holidays, and reports working gas volumes held in storage as of 9 a.m. Friday of the previous week.
U.S. EIA Financial Weekly Index futures contracts will financially-settle based on the change in the number of BCF from the previous EIA Report. The contract size is equal to $1,000 multiplied by the change in the number of BCF in the EIA Report and is quoted in 1 BCF increments with a minimum price fluctuation of $1,000. The listing cycle is up to five weeks or as otherwise published by the Exchange and trading hours are from 7:50PM ET to 6:05PM ET the next day. The minimum block size is 5 lots and the spot month position limit is 103,000 contracts.
The contract will be cleared at ICE Clear Europe.
Participants interested in trading the new contract should contact their clearing member to obtain trading and clearing permission for the “Henry EIA Weekly” product set.
ICE has some great ideas, and they have balls - you have to give them that. I think the premise behind the contract is a good one, but unfortunately, nearly all new exchange traded futures contracts are illiquid and die off - even with market maker programs. I personally would be very reluctant to enter into a position that was next to impossible to exit at a fair price and time. Too bad, but the pioneers are the ones with arrows in their backs as they say.
ICE's roots are with the customers they serve. Before becoming the global exchange it is today, it was originally founded by the Wall Street Banks (Morgan, Goldman), Big Oil (BP) and the big US Energy traders (AEP, Duke, El Paso etc). They have always been very customer focused and in my opinion launched products the customer wants.
NYMEX on the other hand, originally being owned and run by its members/locals was and is a lot more focused on how it's members can make more money rather than the customer itself. This obv changed a lot when they went public but outwardly they seem to have very different cultures and objectives.
Of course today the 'big customer' is the large algo and HFT players.. not the industry participants themselves...
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The contract continues to trade a few dozen times per week. Not a huge success but not dieing either.
ICE have now added additional contracts for what the US Stoarge level will be at the end of this injection season, and at the end of the next withdrawal season. Note that while the variation of the weekly numbers is rather limited (at least until we get into mid winter) the end of season contracts could have very large ranges.
I don't think the end of season contracts have traded yet, but I personally wouldn't be surprised to see these become more successful than the weekly contracts.
Current market for end of injection season (13-Nov) is 3535/3550
Current market for end of withdrawal season (9-Apr) is 1600/1750