CME launch dollar-denominated TTF contract

The CME exchange has launched a new cash-settled TTF front-month futures contract denominated in dollars and British thermal units.

The exchange told ICIS the new $/MMBtu contract aimed to help energy market participants to harmonise spread trading between Europe and the US Henry Hub, by offering a TTF product with an aligned currency, energy unit and contract expiry schedule to the New York Mercantile Exchange (NYMEX) Henry Hub futures.

With the start of LNG exports from the US, the Henry Hub’s price is of increasing importance and interest to European shippers.

The dollar denominated product could also help European counterparties to hedge exposure within oil-indexed supply contracts, which are linked to dollar-denominated oil prices.

The CME’s new product launched on 27 June and will be settled against the ICIS Heren TTF mid-point price assessment for the relevant month on the third NYMEX business day preceding the first calendar day of the contract month. A publicly available dollar/euro exchange rate as published by Reuters on the final trading day will be used to convert the usual TTF price assessment from €/MWh to $/MMBtu.

The first dollar denominated TTF contract to be offered by CME is for October delivery.

The CME said it opted to launch its first dollar-denominated European natural gas contract for delivery at the Dutch TTF – instead of the British NBP – as the Dutch hub offered a better reflection of prices in central Europe, was growing in traded volumes and importance as a reference and had already been written into the formulae within a number of LNG supply contracts.

The bourse said it expected its new product to appeal to large market participants for hedging initially, but that the product would likely attract other groups in the future as a means to take a position on spreads to the Henry Hub.

Open interest on the CME’s TTF calendar month futures (€/MWh) stands at 35,355 lots according to exchange data, or 26TWh.

Traded volume on the TTF front month in the over-the-counter (OTC) market has averaged 222TWh per month so far this gas year, with around 1,266TWh of OTC trade recorded at the hub each month on average. jake.horslen@icis.com