Detailed Glossary

A Detailed Glossary of Energy Trading terms for registered users

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by Nick Henfrey - Wednesday, 3 September 2014, 5:38 PM

A type of commodity, which although it may be applied to any physical commodity, usually describes the ability to store natural gas in its gaseous state

Storage facilities usually consist of natural structures (depleted gas fields for example) that are attached to the gas pipeline network


Storage may be bought from the Storage operators in auctions or traded

Storage allows the option to inject gas into storage, or release gas from storage

The commercial use of storage is generally to allow gas to be transferred into Storage (injected) in Summer months when the prices are low, and released (withdrawn) in the peak Winter months when gas prices are high

Storage behaves somewhat like an option on a physically settled time spread


Clearing House

by Nick Henfrey - Wednesday, 3 September 2014, 5:49 PM

An organization that manages the clearing for an Exchange


Every Exchange appoints a Clearing House to manage the clearing of trades executed on the Exchange

Bigger Exchanges may own their own Clearing House - others may appoint a large Clearing House to act for them

For most settlement and financial purposes the Clearing House (or a Clearing Broker acting for us) is the settlement and financial counterparty to futures, swaps and spot trades executed on the Exchange


Clearing Broker

by Nick Henfrey - Thursday, 4 September 2014, 7:11 AM

An organization that acts as an intermediary wishing to trade on an Exchange


A Clearing Broker acts for an organization in two capacities:

Intermediary between a trading organization and the Exchange's Clearing House - trades are executed directly with the Exchange itself

Intermediary between a trading organization and an Exchange to allow trading with that Exchange without being a member


Linear trade

by Nick Henfrey - Thursday, 4 September 2014, 4:42 PM

A trade with no optionality



The linearity refers to the delta - that is the variation of the value of the trade with the main underlier

Trades with no optionality have a value that is directly proportional to the value of the underlier - if we plot the value against the value of the underlier it will be a straight line - hence linear trade

Trades with optionality do not have a linear relationship between value and underlier. As the value of the underlier becomes less and less favourable the value of the trade becomes nearer and nearer to zero

Unsurprisingly these trades are known as non-linear



by Nick Henfrey - Tuesday, 9 September 2014, 5:26 PM

An Offer is a type of Order; a trader offers to sell a product or commodity at the Offer price


The trader offers a product for sale at a particular price

Offers are normally submitted to a Broker or an Exchange

If an offer is matched by a subsequent bid by another party, then a trade is executed

If the offer matches an already quoted bid then a match is made and a trade is executed

See also Bid



by Nick Henfrey - Wednesday, 10 September 2014, 7:17 AM

Origination - the negotiation and conclusion of bespoke contracts, and structuring of non-standard products to offer for sale


Origination teams and originators in energy trading organizations are about putting together large integrated contracts, outside standard master agreements. These might involve:

Structured long-term procurement deals particularly for oil and gas

Virtual Assets - Virtual storage, virtual power plants, virtual refining

Complex hedging products



by Nick Henfrey - Wednesday, 10 September 2014, 7:25 AM

A term principally used in oil and gas context - covering the search for new reserves, exploratory activities, construction of new extraction facilities, and the running of those facilities


The gas and oil industries are generally divided into three main sectors - roughly following the life cycle of the commodity

Upstream activities follow a sequence:

  • Search - actually locating new sources of oil and gas
  • Exploration - the test drilling of wells or testing of other extraction methods on a potential source
  • Construction of production facilities for the extraction
  • Operation of those production facilities to "produce" oil and gas

See also midstream and downstream



by Nick Henfrey - Wednesday, 10 September 2014, 7:26 AM

In Energy trading a Product is a standardized type of trade which may be offered by an Exchange, quoted by a Broker, or be the subject of a published Index


Note the similarity to an Instrument

A typical product has dimensional attributes of:



by Nick Henfrey - Tuesday, 21 October 2014, 12:59 PM

Energy Trading and Risk Management - usually referring to a computer system that allows trades to be electronically recorded, and risk measures to be calculated



by Nick Henfrey - Tuesday, 28 October 2014, 5:45 PM

A term generally used in gas and power trading for trades that deliver in the near future


The exact definition is not fixed

Some trading platforms define prompt as completing delivery within a week of the trade date, others within the same month as the trade date

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