The New York Mercantile Exchange’s (Nymex) natural gas pitprobably will be a lot more active on Wednesdays, starting March 1.The exchange, along with several major market players, hasconvinced the American Gas Association to move up by two hours therelease of its influential gas storage report.

“Since we started the report we’ve had periodic inquiries fromsubscribers and others about whether it would be possible to moveit up because our report, at least as far as the financial marketgoes, falls out of the floor trading time when it’s released at 4p.m. (EST),” said AGA’s Chris McGill. “Late last year we had aninquiry from Nymex regarding that issue, and we revisited it andwent through a testing period here at AGA to determine whether itwas something that we could logistically do and not lose any of oursample to that process. We determined that we could do it.”

Instead of coming out between 4 and 4:45 p.m. after gas futuressettle, allowing only Nymex Access traders to react to the news,the storage report now will be released between 2 and 2:15 p.m. ESTduring the regular trading session.

“Nymex felt that putting the information in the marketplaceduring the trading day would simply add more liquidity to themarket and that’s essentially the argument that the individualsubscribers have talked to me about over time,” said McGill.

Although at first glance this change might not seem thatsignificant, upon further review observers believe it could greatlyincrease liquidity and market efficiency on Nymex. As it currentlyhappens, the impact of the report is somewhat dulled by after-hourselectronic trading. By the time open-outcry trading begins Thursdaymorning, the market reaction already has occurred to some degree.Since Access trading makes up a very small part of overall dailyactivity on the exchange, the new hours will give a much largerpool of traders the opportunity to react to the news the instant itarrives. And that reaction could be significant, particularly ondays like last Wednesday when AGA reported the third largestwithdrawal from storage in the six-year history of its report.

Tom Saal of Pioneer Futures said the worst possible time torelease the report is after the market closes. It actuallyincreases market volatility. Access trading is very inefficient, hesaid, because a trader must make a phone call to an Access orderclerk who then manually enters the trade. The system is far worsethan open outcry, said Saal. Furthermore, because the Access clerksenter all commodities, not just natural gas, and Access trading onall commodities opens at 4 p.m. EST, it tends to create abottleneck, which adds to the inefficiency.

When the time change takes effect, traders will be able toinstantaneously factor the report into the price using the naturalefficiencies of an open outcry system of price discovery, saidSaal. The more efficient a market, the less volatile.

But in the past, AGA resisted altering the timing of the report,fearing it might lose some of the survey sample. “People arecontributing data to us basically on Monday, Tuesday and Wednesday,and whenever you have a deadline sometimes people push the envelopeon that deadline.”

On Wednesdays AGA typically still is “corralling” its surveysample together. AGA gathers storage volume data from 44 companies,and a staff of three usually spends Wednesday afternoon compiling.The statistics in the survey sample are extrapolated to representworking gas volumes nationwide as of 9 a.m. EST the previousFriday.

“Everybody I guess would like to have [the report] Fridaymorning at 10 a.m. but that’s not possible for us to do… This wasthe best we could do. We’re working with a volunteer group here,”said McGill.

“Our companies have been very cooperative with us. This is avolunteer thing so whenever we think about changing something likethis I try to be very cognizant of the fact that we’re notupsetting their apple cart either because we want them to continueto participate. In fact, they’ve been generally very helpful andwere in this case too.”

He said AGA conducted a test over a month to see if it couldmove up the timing of the report. “We haven’t changed anythingabout the report other than the timing, and as far as how we arelogistically managing the report nothing has changed there either.It makes us work a little harder and push a little more for somecompanies during some weeks, but we feel we can do that and notlose companies to our sample.”

McGill said a note will be posted on the report itself thisWednesday, and AGA is sending letters to all of its storage reportsubscribers.

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