Euroclear Bank will be the first international settlement infrastructure provider to offer settlement and safekeeping services for European Union Allowance units (EUAs) and Certified Emission Rights (CERs).
Leveraging its expertise in settling trades in more than 330,000 securities across multiple asset classes, Euroclear Bank is addressing the post-trade needs of the evolving carbon emission rights market, estimated to be worth over 25 billion.
Effective in March 2008, Euroclear Bank clients will be able to settle spot contracts traded on the Climate Spot Exchange (CSX), OTC or elsewhere and hold the allowances in Euroclear Bank, which will offer custody services for these holdings, with its “ClimateSettle” product.
Trade settlement via ClimateSettle will typically occur on a T+1,delivery-versus-payment basis, and will include multilateral netting. Settlement will be against euros only initially; other settlement currencies will be added in line with client needs.
“We welcome the opportunity of extending our post-trade expertise into the carbon emissions market in tandem with the launch of the Climate Exchange plc’s new CSX exchange. As the first international central securities depository to invest in a post-trade product for the sector, we want to deliver to our clients a service that is both tailored to the intricacies of these instruments, and centralised with other post-trade services that clients use at Euroclear Bank. Following the Kyoto Protocol agreement, the EU and other countries are looking to cut carbon emissions by 25 to 40% by 2020,” says Yves Poullet, CEO, Euroclear Bank.
“We are delighted to announce the launch of new European and CER spot carbon products in collaboration with Euroclear, the world’s premier securities settlement service provider. Emissions trading is already a significant market, which is delivering robust emissions reductions, and we look forward to being a strong participant in that market,” adds Phil Brown, CEO, Climate Spot Exchange.