The Federal Energy Regulatory Commission has laid out the framework for discussion of the underlying liquidity and reliability of natural gas price indices, to be encompassed in a workshop scheduled for Nov. 4.

The workshop is part of a study to be made by the staff to determine what indices “reflect adequate liquidity” to be used in pipeline tariffs. The Commission said many factors need to be considered in determining whether a market is liquid. For instance a market is generally more liquid the less time and cost involved in completing a transaction and the smaller the price effect of any one transaction.

“Measures commonly used to assess the liquidity of a market include: the bid-ask spread, the price effect of a change in volatility in the market, the price effect of large-volume trades, the number of trades, the time between trades, the time it takes to sell an asset, and others,” FERC said in a notice last week (AD03-7-002). It noted, however, that that information may not be available.

The workshop discussion, open to the public, should address:

FERC “would like to hear from as many as possible on these important price formation issues.” Teleconferencing is available. The toll-free dial-in number: 1-888-809-8967. The leader’s name is Jolanka Fisher. Pass code: Fisher. For additional information please contact Fisher, 202-502-8863 or by e-mail at Jolanka.Fisher@ferc.gov.

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