- Additional Energy Contracts Join ICE Risk Model 2
- ICE's JKM LNG (Platts) is the Benchmark Price for North-East Asia Natural Gas
Intercontinental Exchange, Inc. (NYSE: ICE), one of the world's leading providers of financial market technology and data powering global capital markets, and home to the largest and most liquid markets in the world to trade and clear energy derivatives, today announced the launch of new JKM LNG (Platts) options, LNG Balmo freight futures, and U.K. base electricity options, in an expansion of ICE’s global natural gas and power markets.
The new JKM options (JKZ) complement ICE's existing JKM average price options, settling in a similar manner to ICE's TTF options at the end of the month against the underlying future's settlement price. The new options give customers a way to manage Asian natural gas price risk at a specific point in time, alongside the average price options which are used to manage exposure that accumulates over the month.
In addition, ICE introduces new U.K. base electricity options, giving customers another tool to manage price risk as renewables and gas-fired generation widen the range of possible power prices. ICE has also today launched new LNG Balmo freight futures: the Spark30S Atlantic Sabine Pass to Gate contract and the Spark25S Pacific NWS to Tianjin contract, allowing the market to hedge shipping costs on two closely watched Atlantic and Pacific routes.
“ICE JKM options, together with the new LNG freight and U.K. base electricity contracts, provide additional ways to manage price risk associated with the production, transportation and consumption of natural gas and power, from short-term cargo hedging to longer-term portfolio management,” said Gordon Bennett, Managing Director, Utility Markets at ICE.
“As LNG cargoes move between the Atlantic and Pacific basins, ocean tankers act as a virtual pipeline connecting JKM and TTF pricing, and LNG freight contracts let customers manage the cost of transporting those molecules more precisely. Because ICE lists benchmark contracts for natural gas, power and LNG freight in one place, customers can hedge their full position across a range of contract types, at whichever point on the curve and in whatever form fits their exposure. That's why we're seeing more demand to trade gas and power together on a single, globally connected platform,” continued Bennett.
Supporting the capital efficiency of trading natural gas and power, ICE has transitioned Japanese power futures, PJM basis power futures and U.K. NBP natural gas options to ICE Risk Model 2 (IRM 2), its Value-at-Risk based portfolio margining methodology. By modelling relationships between contracts rather than margining each in isolation, IRM 2 gives customers a more portfolio-based view of risk, including the spark spread relationship between JKM and Japanese power.
ICE lists Japanese power futures alongside natural gas, coal and oil, the primary fuels converted into electricity, and since gas and coal make up most of Japan's power generation, prices are shaped by how these fuels compete. Seeing those relationships on one platform lets customers build hedging strategies across them while margining related positions together, improving capital efficiency.
To view the full contract list margined under IRM 2, visit: www.ice.com/clearing/margin-models/irm-2
