Federal position limits would not apply to a location basis contract, a commodity index contract, any guarantee of a swap, or a trade option that meets the requirements of CFTC Rule 32.3. Commodity Index Swap. Liquidity of commodity swap varies greatly from the very liquid jet fuel commodity swap to the relatively illiquid agricultural commodity swap on some unusual and not easily (or even Price Quotation: U.S. dollars and cents per MMBtu. The speculators who buy and sell these commodities through various types of swaps are a crucial part of the market and play a key role in pricing these commodities. Because this contract is priced on the differential between natural gas prices at the Henry Hub in Louisiana and the Waha, Texas, index, it can be quoted as either a positive or negative number. 1. A commodity swap helps producers manage their exposure to fluctuations in their products’ prices, and although they can be risky, these swaps are important for energy, chemical and agricultural companies. A swap that references an energy commodity, generally crude oil and its refined products (including natural gas, reformulated gasoline, and heating oil). The other set of payments can be a fixed or floating rate or the return on another commodity. How the Master Energy Hedging Equation is defined, and what its implications are. A monthly cash settled swap based upon the mathematical result of subtracting the price of the NYMEX Henry Hub Natural Gas Futures Contract, as defined in Reference Price B, from the monthly price published by Inside FERC for the location specified in Reference Price A. Commodity swaps are very important in many commodity … For the spot month, positions in physically-settled contracts may not be netted with positions in linked cash-settled contracts. Agricultural Swap. Trading Units: 2,500 million British thermal units (MMBtu). Commodity swaps allow hedging the commodity risk but also geographical or quality basis risk as well as mismatch of maturity compared to futures. Local cash price - futures price = basis. A swap that references an agricultural commodity as defined in Commission Regulation 1.3(zz). Basis is the difference between the local cash price of a commodity and the price of a specific futures contract of the same commodity at any given point in time. Description:- In an commodity swap, two parties make a series of payments to each other with at least one set of payments determined by a commodity . In this case, the underlying asset is a commodity. Commodity swaps are derivatives; the value of a swap is tied to the underlying value of the commodity that it represents. Cornerstone Global Commodities is a global brokerage firm specializing in energy markets, providing execution services and market insight to over 250 customers worldwide since 2007. How the Master Energy Hedging Equation is defined, and what its implications are. The five different ways the term basis is used in the energy markets. Commodity swaps are used to substitute for a … Proposed Exemptions. The five different ways the term basis is used in the energy markets. A commodity swap is a type of derivative contract that allows two parties to exchange (or swap) cash flows which are dependent on the price of an underlying asset.