- Emissions trading via the Eurex platform opens up trading for international financial market participants/
- Improvement in liquidity and market efficiency/
- Three market makers already committed/
- Significant increases expected in emissions trading
The rapidly growing European Energy Exchange AG (EEX) and the leading international derivatives exchange Eurex are to cooperate in emissions trading. This key partnership was announced by the two parties on Wednesday, October 10 in Frankfurt. As part of this cooperation, EEX and Eurex will offer trading in emission rights through the Eurex system, which they both use. Eurex participants can trade EEX CO2 products via their existing infrastructure connections. This results in a marketplace for CO2 products, which takes the trading, clearing and settlement standards of the financial markets fully into account.
Both partners believe that the cooperation will increase the market’s liquidity and efficiency. By connecting their distribution network, the partners will address more than 600 trading member firms, resulting in the largest international network for emissions trading. Members include financial market participants in the UK and the US, amongst others.
To start with, the EUA futures (EUA: European Union Allowance) already listed on the EEX will be available for trading on the common platform from 5 December 2007. CER futures (CER: Certified Emission Reductions) will follow at the beginning of 2008. Moreover, EUA spot contracts and options on EUA futures will be offered on the platform.
E.ON Sales & Trading, Fortis Bank Global Markets and RWE Trading have already joined as market makers which will place buy and sell orders in the system on a daily base, thereby ensuring liquidity. Additional market makers are expected to join by the launch of the cooperation in December.
The clearing houses of the two exchanges, European Commodity Clearing AG (ECC) and Eurex Clearing AG, will cooperate in settling transactions to offer participants efficient and flexible clearing. Existing clearing relationships can be used which gives participants the opportunity to realize process synergies. Risk management and collateral pledging can also be optimized across various product groups.
Maik Neubauer, member of the EEX AG executive board and responsible for the cooperation project, said: "This cooperation in the rapidly growing emission rights segment is part of the implementation of our internationalization strategy. Liquid emissions trading is a significant component of our product portfolio."
Peter Reitz, Eurex executive board member responsible for product and market development, said: "Through our cooperation, we are combining our respective strengths and bringing the European energy industry and the leading players on the international financial markets together on one platform." Emissions trading is a global product with major growth potential according to Reitz.
Notes to the editor: EEX operates a spot and derivatives market for energy products. With more than 175 trading member firms from 19 countries, this energy exchange boasts the largest number of participants and the highest turnover in continental Europe. While coal is only quoted on the derivatives market, electricity, natural gas and CO2 emission allowances are traded both short-term on the spot market as well as long-term on the derivatives market for up to six years into the future. Clearing of exchange and over-the-counter transactions (OTC clearing) will be provided by ECC. ECC is both the clearing house and a subsidiary of EEX.
Eurex, a subsidiary of Deutsche Börse AG and SWX Swiss Exchange, is one of the world’s leading derivatives exchanges. Eurex offers a wide range of international benchmark products and operates the most liquid market in the world for derivatives on capital market products. Moreover, Eurex is the leading exchange for trading in European equity options, offering 400 single stock futures. Eurex has an integrated clearing house in the form of Eurex Clearing.