Citi is launching a new product quoting UK natural gas contracts denominated in euros rather than British pounds.
The product, aimed at European counterparties active in the UK and continental gas and power markets, is designed to reduce the cost and administrative burden for traders, treasury departments and CFOs who are required to manage volatility in cash-flows arising from cross-border risks.
While such contracts have been offered previously on a bilateral, over-the-counter basis, Citi is the first party to offer broker market liquidity in this manner. The bank will show live bid and offer data via Tullett Prebon and will provide liquidity via Trayport’s electronic dealing platform.
“This new contract addresses our clients’ need for more efficient access to liquidity in UK natural gas, and its functionality is enhanced by our market leading Velocity platform and our global FX expertise,” says Jogchum Brinksma, managing director with responsibility for gas trading at Citi. “Our EuroNBP product combines our renowned FX capabilities with our growing commodities franchise, providing greater ease of execution than has previously existed.”
EuroNBP, a reference to the National Balancing Point, the pricing point for UK natural gas, begins trading on 31 January. EuroNBP contracts will display live and executable OTC bid and offer prices for periods of up to two years forward with monthly, quarterly and seasonal contracts. Standard lot size will be 30 megawatt-hours per hour, in line with other continental European gas markets such as TTF (Dutch Title Transfer Facility) and NCG (Net Connect Germany).
EuroNBP liquidity will mirror that of the traditional NBP market, which is typically quoted in pence per therm.