This plan will also include the introduction of large order execution in the natural gas futures market and electronic trading of cleared natural gas swaps and basis contracts.
Exchange President J. Robert Collins, Jr., said, "We are delighted that we were able to expedite the introduction of this instrument as the current climate in the natural gas market has served to reinforce the necessity of credit intermediation. The liquidity of our market, combined with a clearinghouse that has half billion dollars available to participants on each of the Exchange divisions through each guarantee fund and the respective clearing members, put us in a unique position to offer these services."
Mr. Collins pointed out that natural gas futures and options volume in 2000 reached the equivalent of approximately 230 trillion cubic feet of natural gas and the notional value of last year's transactions Exchange-wide totaled $3 trillion, or $14 billion per day.
EFS transactions will work similarly to exchange of futures for physical (EFP) transactions. Two parties will be allowed to privately negotiate the execution of an integrated over-the-counter swaps and related futures transaction on pricing terms agreed upon by the involved parties. The transaction must involve approximately equal but opposite side-of-market quantities of futures and swap exposures in the same or related commodities and will be permitted until two hours after trading terminates in the underlying futures contract. EFS transactions will be permitted to liquidate, initiate, and transfer futures market positions between the two parties involved in the transaction. The Exchange will charge $10 per side for each EFS transaction. The clearing member representing each party will be responsible to notify the Exchange of the amount and type of futures contracts involved, the price at which the futures transaction should be cleared, and the identity of the parties involved.
