Free Simple Glossary of Energy Trading terms

An Energy Swap is generally a swap of two different prices on an identical, or similar, Energy underlier

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A set of indices used to price a trade

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A Forward, or Forward Contract, is an agreement to buy or sell a commodity at a fixed time in the future

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A form of settlement where responsibility for payment is passed to a third party: a Clearing House or Clearing Broker

The Clearing House accepts responsibility for settling the deal.

Credit risk for the seller in the trade is reduced to almost zero

The Clearing House minimizes its Credit Risk by daily margining

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The Business Process or Capability covering the payments relating to trading activities. It includes agreeing payments, making them, and ensuring that payments are received at the correct times

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Margining is a form of Settlement, whereby exposure to Credit Risk between two parties is limited by keeping the overall Credit Exposure below a certain threshold by means of Margin payments between the parties whenever the threshold is breached

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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

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A spread is a difference in price, or value, of two similar but different underliers

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In trading terms execution is the act that makes a trade a legally binding contract between the trading parties

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