ECC to pave the way for consideration of EUA stocks for margins and optimise settlement of emission allowances

(PresseBox) ( Leipzig, )
As of December, European Commodity Clearing (ECC) will introduce new services for clearing of emission allowances to facilitate more flexible and efficient trading for its customers.

Introduction of EUA as "Margin Credit"

Starting on 2 December 2013, ECC will consider EU allowances (EUA) in the calculation of margins for the first time. Margins are security payments which have to be provided to collateralise exchange trades. Upcoming, stocks of EU allowances can be used to reduce these margin requirements. "The advantage of this innovation is that until the emission allowances are used as compliance instruments, our customers can make use of their stock of EUAs to reduce the capital commitment through other forms of collateral", explains Dr. Thomas Siegl, Chief Risk Officer of ECC. The consideration of EU allowances for margining can be activated upon a joint statement to this end by the trading participant and its Clearing Member and is free of charge.

Emission allowances will be considered towards the Initial Margin for spot markets for power and natural gas and all derivatives markets with regulatory limitations and restrictions on eligibility being complied with in accordance with risk management requirements. The emission allowances used remain freely tradable and can also be transferred back to the customer. For this reason, sufficient collateral needs to be ensured in the event that the margin credit ceases to apply.

Same-day transfer service for EUA

As a new service, from December, participants can have EU allowances transferred back from the customer's internal account at ECC to the registry account on the same day. To this end, the customer submits a transfer request for the next business day and, afterwards, informs ECC of their wish to have the transfer effected as early as on the same day. Before carrying out this request, ECC consults with the Clearing Member supporting the trading participant if the emission allowances concerned are taken into account as "Margin Credit".

Margin method for emissions trading on the Spot Markets

ECC optimised the margin processes in the field of emission allowances in mid-October 2013. As a result, the Spot Initial Margin no longer has to be provided for emissions trading on the spot markets. Spot market transactions in emission allowances are collateralised through a margin requirement issued after the conclusion of the trade, as is the case on the Derivatives Market. Once payment has been effected, the margin is released. Thereby, the long-term capital commitment resulting from the Spot Initial Margin after major purchase transactions on the emissions market is no longer necessary.

European Commodity Clearing (ECC) is the central clearing house for energy and related products in Europe. In its capacity as the central counterparty, ECC assumes clearing as well as physical and financial settlement of transactions concluded on CEGH Gas Exchange of the Vienna Stock Exchange, EEX, EPEX SPOT, HUPX, Powernext and PXE or registered for clearing on these exchanges.
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