Like all commodity markets, the interested parties in the natural gas market want to protect themselves against price risk. While Producers and Importers desire to be protected from price decreases and to have regular cash flow, Consumers expect not to be affected by price increases and to be able to calculate production costs more accurately.

For this purpose, the processes of “predicting the price” and “avoiding risk” play a critical role in commercial decision making. Natural Gas Futures Market; In addition to providing the necessary environment for faster forecasting and more accurate determination of the natural gas price, it will also ensure that the risks are minimized by taking an adverse position against price changes.

• Price Discovery

Buyer and seller interactions are one of the main factors that determine the market price of the product. Futures markets, which are preferred because of their lower transaction costs, generally react more quickly to changes, thus allowing the future price of the product to be predicted.

• Hedging

To protect against possible adverse price movements, it is desirable to spread the trade to maturity. Thus, it is possible to take a “reverse position” that will minimize or eliminate the investment risk undertaken. Participant; It is commercially hedged against price increases with a Long Position (buy) and against price decreases with a Short Position (sell).

Over-the-Counter Market transactions are carried out through “bilateral agreements”, and Natural Gas Futures Market transactions are carried out over “contracts”. To compare;

Bilateral agreements;

• In the Over-the-Counter market, they are special agreements made between the parties.
• They do not eliminate the counterparty risk. In other words, the seller may not deliver the product specified in the agreement, and the buyer may not pay the product amount determined in the agreement.
• It is difficult to transfer to a third party before maturity.
• It is not subject to legal regulation.
• It is subject to stamp duty.

VGP Contracts;

• They are standard contracts made between parties in the organized market.
• There is no counterparty risk. EPİAŞ, the central counterparty, assumes the role of seller against the buyer and buyer against the seller. Physical delivery and payments are guaranteed.
• GFM contracts can change hands continuously until the delivery period.
• It is subject to legal regulation.
• It is exempt from stamp duty.

To participate in the EPİAŞ Natural Gas Futures Market, the following conditions must be met;

• Must have one of the EMRA Import, Export, Wholesale licenses
• Making of EPİAŞ legal entity registration,
• Signing the Market Participation Agreement,
• Signing of NFM Participation Agreement,
• Making Takasbank registration,
• Deposit of Initial Margin and Default Guarantee Account contribution.

• Participants; they can trade between 13:00 – 16:00 every working day.
• Participants; they submit proposals to the relevant contracts for monthly, quarterly and annual delivery periods in accordance with their commercial plans.
• In order for the offers to be valid, the purchase or sale amount must not exceed the participant’s “remaining position limit” in the relevant contract and the “guarantee provided” must be sufficient.
• Each match made obliges the participant to receive (buy) or deliver (sale) an equal amount of natural gas for each gas day of the relevant contract. This amount, which constitutes a physical delivery obligation, is called “open position”.
• In the relevant contract, the participant may reduce its physical delivery obligation by making commercial transactions contrary to its current open position. In this case, since the “net position” it has decreases, the collateral cost that it has to meet also decreases.

• Daily Indicator Price (GGF) is calculated, corrected and updated GGFs are announced as of 17:00 for each contract that is bid and matched during the session.
• The Total GFM Collateral required to be submitted by the participants is updated using the current GGFs. Accordingly, a “collateral call” is made at 17:00 to the participants whose collateral is insufficient.

As an example, let’s say the participant trades in the First Quarter of 2022 (January, February and March 2022) in December 2021;

• Before January 1, 2022, all existing contracts are in the financial period. From this date, the physical period for deliveries begins for January and Q1 contracts.
• At the end of the session on December 29, 2021 (the third business day before the physical period); open positions of the participant in the First Quarter contract are transferred to the January, February, March contracts. The January and First Quarter contracts are then terminated.
• Physical deliveries; It expires on January 31 for the January contract and March 31 for the First Quarter contract.
• During January, February and March contracts are in the financial period and continue to be traded in the market.
• At the beginning of February, the reconciliation of the positions in the January contract and invoicing takes place. Afterwards, the guarantees of the participants are returned.

• In the financial period;

Against the price change risk of GFM contract, from market participants holding open positions; Contract Margin, Market Update Margin and other collaterals are taken.

• In the physical period;

Physical Delivery Guarantee is received from the participants against the invoice collection risk originating from the buyer and the physical delivery risk originating from the seller.