European Climate Exchange (ECX) says that total trading volumes in ECX Carbon Financial Instruments on the International Petroleum Exchange had broken one million tonnes during the first month of trading.
ECX Carbon Financial Instrument (ECX CFI) futures, which launched on Friday 22 April and are admitted to trading on the IPE, passed this historic milestone on Tuesday 24 May – a day which also saw a record of 233,000 tonnes of CO2 traded. The previous daily record, of 200,000 tonnes, had been set on Monday 23 May. Total volumes for the week (Monday 23 May to Friday 27 May) were 594,000 tonnes.
“Almost exactly one month after we started the market and after two record days of trading of over 200,000 tons each day, we broke the one million ton barrier,” says Peter Koster, chief executive of ECX. “We now have a vibrant market with two-way prices actively quoted throughout the trading day and almost 35 industrial and financial entities signed up for ECX CFI’s membership on IPE. In addition, another 30 entities are accessing trading though order-routing via one of the General Clearing Members.”
Full details of the first month’s trading are as follows:
Volume traded: 1,321,000 tonnes
Lowest price: €15.75 (Thursday 28 April)
Highest price: €20.30 (Thursday 26 May)
Access to the IPE for the trading of ECX CFI futures Contracts can be secured by becoming an IPE Member or order-routing as a client of an IPE Member. ECX and IPE also announced that they now have over 15 Clearing Members for the ECX CFI futures contract, the most recent entrant being BHF Bank, Germany’s largest clearing bank for energy contracts.
The IPE Members who can clear and/or offer clients order-routing access to ECX CFI futures Contracts are: ABN AMRO Futures, ADM Investor Services International, Bache Financial, Barclays Capital, Bear Stearns International, BHF Bank, BNP Paribas Commodity Futures, Calyon Financial, Cargill Investor Services, Deutsche Bank, Fimat International Banque, Fortis Bank Global Clearing, Goldman Sachs, MAN Financial, Merrill Lynch International, Morgan Stanley & Co International, Refco Overseas and UBS. Other IPE Members who have signed up to trade ECX CFI futures Contracts are: Accord Energy, BP Gas Marketing, Breakwater Trading, E.On UK, Kyte Broking, Marquette Partners (UK), Merrill Lynch Commodities (Europe), Scottish Power Energy Management, Sempra Energy Europe, Shell Energy Trading, Shell International Trading & Shipping, Spectron Energy Services, TFS Derivatives and Tradelink.
The ECX CFI futures Contract, which is listed for electronic trading on the IPE, is the first exchange-traded CO2 futures contract for the European Union’s Emissions Trading Scheme. ECX CFI futures allow users to lock-in prices for emissions allowances delivered at set dates in the future and are a useful alternative to over-the-counter forward contracts, allowing users to secure transparent prices and reduce counterparty risk. Trades are cleared through LCH.Clearnet Ltd.
ECX products were introduced by Dr Richard Sandor, the founder of financial futures, at the Brgenstock derivatives conference on September 9 2004. Sandor directed the launch of Chicago Climate Exchange (CCX), which provides a similar greenhouse gas trading market in the United States. ECX is a wholly owned subsidiary of CCX.
Each ECX Carbon Financial Instrument will be based on emission allowances issued under the EU’s Emission Trading Scheme (ETS). The ETS is a market-based regulatory mechanism designed to help scale back carbon dioxide (CO2) emissions within the EU to pre-1990 levels by 2012. For the first phase of ETS, emission allowances come into effect from 1 January 2005 for 12,000 energy and industrial installations that account for 46 percent of the EU’s CO2 emissions.
European Climate Exchange: ECX, a wholly owned subsidiary of CCX, manages marketing and promotion of European environmental instruments. ECX is led by Neil Eckert, Chairman and Peter Koster, CEO. Neil Eckert was previously main board director of Benfield Group 1991-1999. In 1995 he founded Brit Insurance PLC which today is a Ј800 million market capitalised UK general insurer. On 20 April 2005, Eckert stepped down as CEO of Brit. He is also a Director of Climate Exchange plc which owns a significant stake in ECX. Peter Koster previously served as chief executive officer of Fortis Bank UK. From 1998 to 2001, Koster also acted as non-executive Director of the London International Financial Futures Exchange (LIFFE). During his career in the financial services industry, Koster held senior positions at MeesPierson, Van der Moolen Holding and ABN-Amro. Koster is a native of Holland and lives in Amsterdam where ECX is headquartered.
Chicago Climate Exchange, Inc. (CCX) is a self-regulatory exchange that administers the world’s first multi-national and multi-sector marketplace for reducing and trading greenhouse gas emissions. CCX represents the first legally binding commitment by a cross-section of North American corporations, municipalities and other institutions to establish a rules-based market for reducing greenhouse gas emissions. CCX enables members to receive credit for reductions, and to buy and sell credits to determine the most cost-effective means of achieving emission reductions.
More than 80 leading businesses and public institutions, including global companies such as Stora Enso, Ford Motor, American Electric Power, Dupont, Motorola, Rolls Royce and IBM, have voluntarily joined CCX. CCX industrial members commit to limit their CO2 emissions, with the result that more than one million metric tonnes of carbon dioxide have been traded on the exchange.
International Petroleum Exchange (IPE) is Europe’s leading energy futures and options exchange, providing regulated electronic marketplaces where participants use futures and options to manage their price risk exposure in the physical energy markets. ECX CFIs will be listed by and traded on the IPE. The IPE is a wholly-owned subsidiary of IntercontinentalExchange Inc. which operates global OTC marketplaces for the trading of commodities on its Internet-based Interchange trading platform.
Trading of ECX contracts will be based on the European Union Emissions Trading Scheme (EU ETS). The EU ETS, established under Directive 2003/87/EC, created the world’s largest market in emission allowances, operating on a ‘cap and trade’ basis. The scheme will regulate the emissions of carbon dioxide from installations across the 25 Member States and will include power generation, mineral oil refineries, offshore installations and other energy-intensive industrial sectors in its first phase (2005-2007). The second phase of the ETS (2008-2012) will coincide with the first Commitment Period under the international Kyoto Protocol.