MIBGAS Derivatives has launched a new initiative to encourage participation by agents and market liquidity. The launch is aimed at the liquefied natural gas (LNG) market. Introducing the market driver.
The function of the market driver is to launch a certain volume of bids to buy or sell gas (not both simultaneously) during the opening auction or short-term windows known by the other agents.
Difference from the market maker
The difference with the already established MIBGAS market maker is that, in the case of the market maker, the inclusion of gas purchase and sale bids is simultaneous, with a certain price differential between the two. The driver is only for purchase or for sale bids.
Therefore, it might be said that a market maker has more influence on the preparation of the price signal, while a market driver has more influence on the volume traded.
MIBGAS Derivatives has reached an agreement with an agent that will act as a catalyst for the market, so that, in the coming weeks, on Tuesdays and Wednesdays it will make bids for LNG in the opening auctions of the product with delivery of LNG in the Spanish Virtual Balancing Tank on the day following its negotiation (product D+1).
Following this agreement, MIBGAS Derivatives will collaborate with a market agent who will be able to make attractive bids available to other agents, mainly for the sale of LNG at specific times.
With this initiative, MIBGAS Derivatives wants to attract more negotiation and make the LNG market more attractive for agents, even more so in the current situation where the interest in having LNG is being fuelled by the geopolitical tension resulting from the invasion of Ukraine.
In a first phase, the market promoter will act in the LNG segment, in the virtual balancing tank, where the driver will perform its function two days a week by introducing significant quantities for LNG trading; the possibility of having a market driver for the natural gas futures market at the virtual balance point, PVB, will also be explored at a later date.
All MIBGAS Derivatives agents receive advance notification of the presence of the market driver in the trading session on the selected days. They will therefore know when the market driver is going to enter quantities in the bid book, thus ensuring more bids on the trading screen with the aim of offering agents a broader range of possibilities for managing their portfolios. The market driver bidding in the auction may submit all-or-none bids (AON).
In short, MIBGAS, in its constant search for service improvement, hopes that its new market driver will be attractive and help establish the Iberian Peninsula LNG hub.