On June 2, 10x will begin publishing the number of counterparties and the number of trades for each of its daily indices. 10x currently publishes the daily high, low, and index price and volume for 48 gas hubs and 9 power hubs. These indices represent the volume-weighted, average price of actual trades executed on the IntercontinentalExchange (ICE) platform - no subjective adjustments or editorial assessments are made.
"This unprecedented level of transparency, published in response to recommendations from the American Gas Association (AGA) and others, arms users with the information necessary to judge for themselves the depth of liquidity at any given hub and therefore the reliability of the published index," said Martin Wadhwani, Managing Director of 10x. "Furthermore, because our indices have always been based on actual trades, the volumes we publish avoid the double-counting problem that plagues survey-based indices." Annual independent audits of 10x's methodology and processes further reinforce the credibility of its indices.
With an estimated 60-70% of all spot gas trading being conducted on the ICE platform, the 10x gas indices provide a robust representation of transacted market prices. Each day on ICE, about 150 firms buy and sell spot gas with 500 traders executing over 1,000 trades, for roughly 6 BCF of gas. As a result, the average gas index hub sees about 20 trades per day involving 15 different counterparties. Similarly, over 100 firms and 250 traders buy and sell next day power on the ICE platform. In these daily power markets, the average index hub sees about 30 trades per day involving 18 different counterparties. The electronic trading of these daily markets on ICE allows the entire marketplace to monitor, in real-time, the direction of the indices.
Added Wadhwani, "10x encourages fellow index publishers to likewise embrace this AGA recommendation and the recommendations of others aimed at increasing transparency and restoring confidence in their indices."
These include:
- base indices on actual trade data
- publish a detailed index methodology including under what circumstances the methodology deviates from a volume-weighted average price and how those adjustments are calculated
- publish volume and clearly explain whether both sides of a trade are reflected (double-counted)
- publish the number of trades and counterparties included in each index
- submit the index provider's methodology and processes to external audit
