FINANCIAL MARKET STRUCTURE
FINANCIAL MARKET STRUCTURE Albert Helmig Grey House
CSIS MARCH 30 2017
Economic Purpose Criteria • Futures Markets provide for RISK TRANSFER and PRICE DISCOVERY • Transparent, Liquid , provide Guaranteed Financial Performance ( Clearing) • Futures are Standardized contracts • Futures expire into cash positions. Convergence.
Contract Design • Specific Size ( 1000 barrels) • Specific location ( Cushing) • Specific expirations( Months) • 200 grades of Crude Oil delivering to 700 refiners. • Physicals trade at Premium , Par and Discounts to Futures.
Gross commercial shorts vs gross speculative longs Nymex
Contracts
$110 700000 $100 $90 200000
$80 $70 $60
-300000
$50 $40 -800000 $30 $20 -1300000
$10
WTI Commercial shorts
WTI non-Commercial longs
Prompt WTI
Growth in Nymex Open Interest Across the Full Year
Open Interest
325000
275000
225000
175000
125000
75000
25000 jan
jun
42713
42348
dec
41983
Forward Price Curve WTI Futures Curves 115 ($/bbl)
105
40182
40546
95
40921 41277
85
41641 75
65
55 42006
Jan 4 '17 Mar 24 '17
45
Jan 4 '16 35 2010 Source: Nymex
2013
2016
2019
2022
2025
41304 41332 41361 41393 41424 41451 41485 41515 41544 41577 41605 41638 41669 41697 41726 41758 41788 41817 41850 41879 41908 41942 41968 42003 42033 42061 42090 42123 42152 42184 42214 42244 42276 42306 42335 42368 42398 42426 42459 42489 42516 42550 42578 42611 42641 42671 42702 42732 42765 42794
Cash and Carry vs Days of Forward Cover
73 days of cover $8
71 $6
69 $4
67 $2
65 $0
63 -$2
61 -$4
59 -$6
57 -$8
55 -$10
Days of forward cover 1 minus 6 Nymex WTI
CSIS MARCH 30 2017
Economic Purpose Criteria • Futures Markets provide for RISK TRANSFER and PRICE DISCOVERY • Transparent, Liquid , provide Guaranteed Financial Performance ( Clearing) • Futures are Standardized contracts • Futures expire into cash positions. Convergence.
Contract Design • Specific Size ( 1000 barrels) • Specific location ( Cushing) • Specific expirations( Months) • 200 grades of Crude Oil delivering to 700 refiners. • Physicals trade at Premium , Par and Discounts to Futures.
Gross commercial shorts vs gross speculative longs Nymex
Contracts
$110 700000 $100 $90 200000
$80 $70 $60
-300000
$50 $40 -800000 $30 $20 -1300000
$10
WTI Commercial shorts
WTI non-Commercial longs
Prompt WTI
Growth in Nymex Open Interest Across the Full Year
Open Interest
325000
275000
225000
175000
125000
75000
25000 jan
jun
42713
42348
dec
41983
Forward Price Curve WTI Futures Curves 115 ($/bbl)
105
40182
40546
95
40921 41277
85
41641 75
65
55 42006
Jan 4 '17 Mar 24 '17
45
Jan 4 '16 35 2010 Source: Nymex
2013
2016
2019
2022
2025
41304 41332 41361 41393 41424 41451 41485 41515 41544 41577 41605 41638 41669 41697 41726 41758 41788 41817 41850 41879 41908 41942 41968 42003 42033 42061 42090 42123 42152 42184 42214 42244 42276 42306 42335 42368 42398 42426 42459 42489 42516 42550 42578 42611 42641 42671 42702 42732 42765 42794
Cash and Carry vs Days of Forward Cover
73 days of cover $8
71 $6
69 $4
67 $2
65 $0
63 -$2
61 -$4
59 -$6
57 -$8
55 -$10
Days of forward cover 1 minus 6 Nymex WTI
