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Detailed Glossary
Detailed Glossary
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Futures Contract | ||
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A Futures Contract is an agreement to buy or sell a commodity at a fixed time in the future executed on or with an Exchange Detail Note the similarity in description to a Forward Contract We will focus mainly on the differences Exchanges list standardized products that may be traded. A product describes a standardized commodity, delivery period and delivery location that may be traded Exchanges list a buy and a sell price for every different product they list. These buy and sell prices are provided by Market Makers Futures Contracts are always cleared Futures Contracts may be physically or financially settled A financially settled futures contract may be taken into the delivery period, and is settled by daily margining at the daily fixed in price If you're wondering how that is different to an exchange-traded swap - then the difference is a swap is very like a financially settled futures contract, but the swap is generally not daily margined | ||
Asset | ||
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In energy trading terms an asset is something an organization owns that can physically provide, transform or move an energy commodity, such as a gas field, a power station, or a refinery Detail In trading terms many assets that transform or help to move a commodity are in effect an option on a spread:
Long term supply contracts are also sometimes referred to as an asset | ||
Market | ||
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In Energy Trading a Market describes a standardized trading environment for a commodity and a geographic zone The geographic zone is not necessarily the delivery location, but usually determines the valuation of the traded commodity For example API#2 is a market based on the published index for coal in the Amsterdam, Rotterdam and Antwerp (ARA) location; a trade may deliver coal to a port in France but still be part of the API#2 market Detail A market combines attributes of commodity and location and may have an associated calendar and business rules, which provide defaults for any trade associated with the market Some delivery locations are also markets, so far example NBP is a gas location and also market Note the similarity and difference to a Master Agreement which has similar attributes | ||
Trading at Settlement | ||
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A type of Futures contract that is physically delivered and settled at the exchange closing price of the contract Detail Traders make bids on an Exchange for a TAS contract, specifying volume and price offset, the Exchange matches bids and offers in the usual way For example a trader may bid to buy 1,000 barrels of crude oil at the settlement price minus 3 cents, if another trader offers to sell that volume at that price then the exchange matches the orders and a TAS futures contract is executed at the settlement price less 3 cents A TAS futures contract is similar to an indexed forward TAS contracts are frequently used in oil futures | ||
Indexed Forward | ||
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Auto Trade Capture | ||
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Auto Trade Capture is a capability in most trading organizations (and many have an application called ATC) that allows trades executed on an electronic trading platform (usually exchange or broker) to be automatically downloaded to our organization's ETRM Detail ATC usually works by accessing an Instance of Trayport GlobalVision which is a proprietary product. Trayport provide broker trading platforms to most common Energy Trading Brokers and some Exchanges, and also acts as an interface to many Exchanges running their own trading platforms Trades executed on compatible platforms may be accessed as XML and mapped into the local ETRM It is normal for trades to be entered into the ETRM in a status that requires a trader to "validate" or "approve" the trade as having been executed Trades may also be received from other platforms, often in the form of FIX format messages Most ATC systems consist of:
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Swap | ||
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An Energy Swap is generally a swap of two different prices on an identical, or similar, Energy underlier Detail While financial market swaps may involve swapping almost any cash flow for any other cash flow, an Energy Swap involves the swap of two different prices on an identical, or similar energy product or underlier. The two types of Energy Swap are:
By definition, Energy Swaps are always financially settled Energy swaps may be traded OTC or on an Exchange An Energy Swap is very similar to a a financially settled Futures or Forward Contract Exchange traded swaps are generally settled through non-daily margining - and therefore have credit risk Financially settled futures, like all futures, are settled through daily margining - and have minimal credit risk | ||
Spread | ||
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A spread is a difference in price, or value, of two similar but different underliers An Energy Spread trade s a type of trade between two floating prices on similar but not identical energy underliers Detail Spread trades are usually financially settled Different types of Energy Spread are classified by the difference in the underliers:
Many commodity spreads are associated with the cost of generating electricity, so they involve electricity as one commodity, the others may be:
Another group of commodity spreads are associated with the cost of refining, so they involve crude oil as one commodity, the others being refined products such as gasoline. These are known as crack spreads Spread is also used to describe the difference in prices between locations, times, commodities
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Injection | ||
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Term used to describe transferring natural gas from a transmission network into a storage facility Detail Injection volumes are nominated in the same way as other physical gas movements Injecting gas into a storage facility requires the organization to have available storage capacity See also Storage for more details | ||
Withdrawal | ||
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