<?xml version="1.0" encoding="utf-8"?>
<InstanceReport xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance" xmlns:xsd="http://www.w3.org/2001/XMLSchema">
  <Version>1.0.0.3</Version>
  <hasSegments>false</hasSegments>
  <ReportName>TRADING INSTRUMENTS</ReportName>
  <RoundingOption />
  <Columns>
    <Column>
      <LabelColumn>false</LabelColumn>
      <Id>1</Id>
      <Labels>
        <Label Id="1" Label="12 Months Ended" />
        <Label Id="2" Label="Dec. 31, 2009" />
      </Labels>
      <CurrencySymbol>$</CurrencySymbol>
      <hasSegments>false</hasSegments>
      <hasScenarios>false</hasScenarios>
      <Segments />
      <Scenarios />
      <Units />
    </Column>
  </Columns>
  <Rows>
    <Row>
      <Id>2</Id>
      <Label>Notes to Consolidated Financial Statements</Label>
      <Level>0</Level>
      <ElementName>sre_NotesToConsolidatedFinancialStatementsAbstract</ElementName>
      <ElementPrefix>sre</ElementPrefix>
      <IsBaseElement>false</IsBaseElement>
      <BalanceType>na</BalanceType>
      <PeriodType>duration</PeriodType>
      <ElementDataType>string</ElementDataType>
      <ShortDefinition>No definition available.</ShortDefinition>
      <IsReportTitle>false</IsReportTitle>
      <IsSegmentTitle>false</IsSegmentTitle>
      <IsSubReportEnd>false</IsSubReportEnd>
      <IsCalendarTitle>false</IsCalendarTitle>
      <IsTuple>false</IsTuple>
      <IsAbstractGroupTitle>true</IsAbstractGroupTitle>
      <IsBeginningBalance>false</IsBeginningBalance>
      <IsEndingBalance>false</IsEndingBalance>
      <IsEPS>false</IsEPS>
      <Cells>
        <Cell>
          <Id>1</Id>
          <ShowCurrencySymbol>false</ShowCurrencySymbol>
          <IsNumeric>false</IsNumeric>
          <NumericAmount>0</NumericAmount>
          <RoundedNumericAmount>0</RoundedNumericAmount>
          <NonNumbericText />
          <NonNumericTextHeader />
          <FootnoteIndexer />
          <hasSegments>false</hasSegments>
          <hasScenarios>false</hasScenarios>
        </Cell>
      </Cells>
      <ElementDefenition>No definition available.</ElementDefenition>
      <IsTotalLabel>false</IsTotalLabel>
    </Row>
    <Row>
      <Id>3</Id>
      <Label>Trading Instruments Disclosure</Label>
      <Level>1</Level>
      <ElementName>us-gaap_TradingSecuritiesAndCertainTradingAssetsTextBlock</ElementName>
      <ElementPrefix>us-gaap</ElementPrefix>
      <IsBaseElement>true</IsBaseElement>
      <BalanceType>na</BalanceType>
      <PeriodType>duration</PeriodType>
      <ElementDataType>string</ElementDataType>
      <ShortDefinition>No definition available.</ShortDefinition>
      <IsReportTitle>false</IsReportTitle>
      <IsSegmentTitle>false</IsSegmentTitle>
      <IsSubReportEnd>false</IsSubReportEnd>
      <IsCalendarTitle>false</IsCalendarTitle>
      <IsTuple>false</IsTuple>
      <IsAbstractGroupTitle>false</IsAbstractGroupTitle>
      <IsBeginningBalance>false</IsBeginningBalance>
      <IsEndingBalance>false</IsEndingBalance>
      <IsEPS>false</IsEPS>
      <Cells>
        <Cell>
          <Id>1</Id>
          <ShowCurrencySymbol>false</ShowCurrencySymbol>
          <IsNumeric>false</IsNumeric>
          <NumericAmount>0</NumericAmount>
          <RoundedNumericAmount>0</RoundedNumericAmount>
          <NonNumbericText>&lt;div style="font-size:12pt"&gt;&lt;p&gt;Trading Instruments &lt;br /&gt;Trading Securities&lt;br /&gt;In the first quarter of 2008, Sempra Commodities recorded $2 million of pretax losses related to trading securities, including a pretax gain of $3 million resulting from sales and an unrealized pretax loss of $5 million related to securities held at March 31, 2008. &lt;br /&gt;In 2007, Sempra Commodities recorded $14 million of pretax gains related to trading securities, including a pretax gain of $6 million resulting from sales, an unrealized pretax gain of $8 million from transfers to trading securities from available-for-sale securities due to changes in their status, and unrealized pretax loss of a negligible amount related to securities held at December 31, 2007.&lt;/p&gt;&lt;/div&gt;</NonNumbericText>
          <NonNumericTextHeader>Trading Instruments Trading SecuritiesIn the first quarter of 2008, Sempra Commodities recorded $2 million of pretax losses related to trading securities,</NonNumericTextHeader>
          <FootnoteIndexer />
          <hasSegments>false</hasSegments>
          <hasScenarios>false</hasScenarios>
        </Cell>
      </Cells>
      <ElementDefenition>No definition available.</ElementDefenition>
      <ElementReferences>No authoritative reference available.</ElementReferences>
      <IsTotalLabel>false</IsTotalLabel>
    </Row>
  </Rows>
  <Footnotes />
  <ComparabilityReport>false</ComparabilityReport>
  <NumberOfCols>1</NumberOfCols>
  <NumberOfRows>2</NumberOfRows>
  <HasScenarios>false</HasScenarios>
  <MonetaryRoundingLevel>UnKnown</MonetaryRoundingLevel>
  <SharesRoundingLevel>UnKnown</SharesRoundingLevel>
  <PerShareRoundingLevel>UnKnown</PerShareRoundingLevel>
  <HasPureData>false</HasPureData>
  <SharesShouldBeRounded>true</SharesShouldBeRounded>
</InstanceReport>
