London, 25 February 2011

ICE Futures Europe said it may publish a list of EUAs that are flagged as stolen and bar them from being traded on its platform. The world’s biggest carbon bourse on Thursday proposed several measures that it hopes will reassure its members and allow it to reopen its platform for prompt carbon trade, which will remain suspended “for the time being”.

“We will continue to keep the (spot) market closed ... we have no timetable for reopening it at the moment though we are keeping this under review,” David Peniket, president of ICE Futures Europe, told Point Carbon News.

“The main channel for managing price risk in this market is the futures market, so this is our main focus and we want to ensure robust protections are in place.”

The exchange suspended trade in its daily EUA and CER futures on 19 January after the European commission froze transfers from carbon registries across the bloc following a spate of permit thefts.

Blacklist

“The March futures delivery will go ahead, the only question is the extent to which we filter (EUAs) or introduce additional controls,” Peniket said in a telephone interview.

He said ICE has lobbied the commission to publish a full list of the serial numbers of all the EUAs reported stolen.

“We think this would be a helpful thing, but in the absence of that we will produce our own list based on the criteria set out ... and filter deliveries against it,” he said, referring to the consultative circular distributed to members on Thursday.

In response to requests from its members, ICE has proposed that it publish the serial numbers of any carbon units that would not be acceptable for delivery, based on any list submitted to it by a registry, EU government, authoritative UN or Kyoto protocol bodies or the EU commission.

It said that CERs and ERUs would also be included in the list.

“Although the list will include EUAs related to the more recent thefts, we are also asking members if we should include EUAs from Germany and Romania which were affected last year,” he said, referring to permits stolen from cement maker Holcim's account at the Romanian registry in November and from a German paper company in January 2010.

“We will publish this list on our website and update it on a regular basis.”

Peniket also said that no trades would be unwound as a result of a published list of stolen EUAs.

“We’re not proposing to change any trades retrospectively. We’re looking at what to do going forward,” he said.

Limitations and recommendations

ICE also proposed to limit deliveries of the instruments to and from accounts in the UK, German and Dutch registries “plus any other registries notified in future circulars”.

Peniket said the move should not affect trade, as participants could continue to trade through ICE’s clearing members, which have accounts at these three registries.

“Prior to this, we accepted delivery directly from any EU registry, but now things need to be routed through one of these three registries,” he said.

Despite the reopening of 10 European emissions registries and the resumption of spot trading on at least two carbon bourses, traders continue to show reluctance to trade prompt delivery permits due to the uncertainty surrounding the stolen units.

“It’s clear now that the commission is taking steps to address these issues, and we would expect significant developments, particularly on the legal side, in advance of the December delivery,” Peniket said.

He added that he supports a proposal made earlier this month by Barclays Capital to limit the number of participants in the EU emissions trading scheme.

“We would also welcome the commission looking again at restricting the categories of participants who can have EU ETS registry accounts,” he said.

“We think it’s very important that the market works together to ensure there is constructive progress around restoring market confidence.”

Spot trade resumption

ICE’s consultation closes on 4 March at 1200 GMT, suggesting that trade on the bourse will unlikely resume before the second week of March. ICE said it will give at least 36 hours’ notice before reopening its daily futures markets.

France’s Bluenext exchange and Germany’s EEX both resumed spot carbon trade on 4 February, the day the EU executive allowed five registries to reopen after passing security checks.

However, spot volume has been slow to recover to levels seen before the suspensions, with traders wary that further stolen certificates had yet to be reported.

Rival exchange GreenX, which is backed by several banks and brokers, has said it would not reopen for spot trade until it sees an official list of stolen allowances.

Ends -- Commodities Now

By Michael Szabo

www.pointcarbon.com