Regulatory Submissions

Mr. Derek Sammann
Senior Managing Director, Global Head of Commodities
Options & International Markets
CME Group
Chicago, IL

Dear Mr. Sammann:

Last week, natural gas futures experienced their largest one-day gain since the 1990s, apparently due to
a short squeeze in a market that is thinly traded at the close. The impact on the American natural gas
consumer is dramatic. Accordingly, the American Public Gas Association (APGA), which represents the
interests of over 700 community and municipally-owned gas systems in 38 states, asks that CME Group
more closely examine recent natural gas futures market activity.

The natural gas February contract settled at $6.265/MMBtu on the New York Mercantile Exchange
(NYMEX) on January 27, 2022, substantially higher than the January close of $4.024/MMBtu. Moreover,
there was a 46% rally in that futures contract during the last 30 minutes of trading. Reports have stated
that some in the trading industry do not believe that the move was supported by fundamentals. Prices
fell the next day. Rather, that price change appears to reflect limited liquidity and short covering trades
near the close as the February contract expired. APGA has seen a pattern of up moves in this vital market
on the closing day of this contract ostensibly caused by limited liquidity. Due to this concerning market
activity, we are requesting a prompt review and public report from CME Group.

February is the middle of winter when demand for natural gas is highest for home heating loads.
Accordingly, our members have no choice but to purchase gas regardless of price to meet this inelastic
demand. Many distributors attempt to hedge their price risk, but this was made difficult this winter
because of price volatility in the market in 2021. Further, many systems are still paying the bills that
accrued over Presidents’ Day weekend last year, during which time Winter Storm Uri drove natural gas
prices to historic levels throughout much of the U.S.

Importantly, the impact of the financial market is magnified by its influence on natural gas index prices to
which most sales to residential consumers are linked. Price index developers increasingly use futures and
financially traded basis contracts to set their indices because physical markets do not report trades to
them. This is the subject of a rule proposed last year by the Federal Energy Regulatory Commission..1

APGA members—locally-owned and governed to be accountable to the neighbors they serve—are
uniquely concerned with this recent troubling market activity, as these higher fuel costs must be passed
through to consumers in their local communities. Consequently, we have requested that the Commodity
Futures Trading Commission conduct an investigation into the trading activity that led to the recent price
spikes and determine whether any market participants engaged in manipulation or other unlawful
conduct. In line with this, we also ask that CME Group make a full public accounting of recent market
activity, which will provide additional transparency to the trading that led to these price increases and
help determine whether market reforms should be undertaken.

We look forward to working together with you to ensure that natural gas remains an affordable energy
choice for the thousands of American communities who rely on the fuel to heat their homes and water,
cook their food, and dry their clothes. Thank you for the consideration of this request, and if you have
any questions, please do not hesitate to contact me.

Respectfully submitted,
Dave Schryver
President & CEO
American Public Gas Association

1See Safe Harbor Policy for Data Providers to Price Index Developers, 86 Fed. Reg. 12132 (Mar. 2, 2021)