With the total number of open positions on its Waha futurescontract languishing under 400, the Kansas City Board of Trade hastaken measures that could signal the end of that contract as itcurrently exists. The exchange is in discussions withPG&E-Texas, the owner of the Waha hub, over potentialramifications of a switch to a basis contract tied to Nymex’s HenryHub futures contract.

The idea was first suggested during a teleconference held lastmonth between the KCBT and a handful of its largest gas contractplayers. Candice Bowman, a spokesman for the exchange, said themarketers were the ones to float the idea. “They proposed thechange to us,” she said.

As the idea stands now, the basis contract would be tradedthrough open outcry in Kansas City, MO. Like the contract now inexistence, deliverability would be backed by the KCBT, a fact thatmight help it get back on its feet, one source said.

“Many people are attracted to the fact that the KCBT backs thedeliveries just like the Nymex does. There is a financial guaranteethat goes along with the contract.”

No change is in the immediate future, however. The KCBT is stillexploring its options, and some customers have contracts at thepoint that don’t expire until the summer of 2000. Any change wouldhave to be filed with the Commodity Futures Trading Commission(CFTC). Even then, Bowman noted, any change would undergo a 45-dayapproval process. PG&E would also have a large part in a finaldecision.

A potential switch to a basis contract did not impress onetrader. “I don’t think that would help solve the situation. Thatpoint has been so illiquid for so long and it has grown sodependent on the Nymex, it represents a basis contract anyway. Youcan achieve the same result using other, more liquid tools.”

Another problem with a KCBT basis contract is the 2-cent hub feecharged to sellers of gas if a contract is taken to delivery. Ifthis charge is not reduced, marketers could find conventional basiscontracts at a better price.

Bowman, however, said the participants in the conference callstill showed interest in having a western contract at the KCBT. “Werealize the East-West basis has not been moving for the past coupleof years, but our customers still want another vehicle forEast-West arbitration.”

Bowman stressed the preliminary nature of the situation. “Rightnow, we’re just waiting to find out what the discussions withPG&E-Texas turn up. We want to make changes to make the productmore beneficial, but there is no guarantee that a change will takeplace.”

John Norris

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