no 18/08 Margin rules for EUA spot for Compliance Period II (2008-2012)

Lysaker, 14 March 2008

Nord Pool will start trading and clearing of spot contracts for delivery of allowances for Compliance Period II (2008-2012) from 15 April 2008, see exchange information no 17-2008. 

In connection with this, Nord Pool Clearing (NPC) will make some changes to the existing margin rules for EUA spot for Compliance Period II. 

The present spot margin rules for Compliance Period I (2005-2007) is that NPC calculates a fixed spot margin based on volume and price for all the members on the EUA spot market. The spot margin method, with minor adjustments, will continue to be used as margin rule for EUA spot phase 2. This means that for a member to get access to the EUA spot market for Compliance Period II, NPC will calculate the spot margin depending on the credit rating for each counterparty. The same rules apply for both buyers and sellers and there will be no limitations on the electronic access to the market place or on the volume traded on Nord Pool Exchange or OTC. However, NPC will consider calling for collaterals in advance of large trades.

In the existing margin rules all members of the EUA spot market must lend 5 lots to NPC according to the Clearing Rules for the allowances market section 9.2.10 and appendix 12. This arrangement will no longer be a part of the new margin rules.

Furthermore, net sellers have in the past had the possibility to pre-deliver allowances to reduce or eliminate the spot margin (see clearing rules for the allowances market section 9.2.9.). This arrangement will no longer be a part of the new margin rules.

NPC is introducing a new opportunity for members to trade EUA spot without the need for a fixed spot margin. In this case, the members have to pre-deliver allowances or pre-pay the settlement before a trade is accepted for clearing. The members do not get electronic access to the spot market but have to place all orders on Nord Pool Exchange by voice broking and pre-deliver or pre-pay settlement before the orders can be placed in the market and taken to clearing.

Transition from Compliance Period I to Compliance Period II

All participants who are spot members for Compliance Period I will automatically get their spot membership transferred to Compliance Period II.

Please note that the existing spot margin will be automatically adjusted according to the new spot margin rules.  

Allowances which are lent to NPC will be transferred back according to exchange information no 15-2008. 

Participants who no longer want to be a member on the EUA spot market must give a notice by email to: clearingrm@nordpool.com clearingrm@nordpool.com 

Adjustment to the clearing rules for the EU allowances market

The clearing rules for the EU allowances market will be adjusted according to the changes described above. The adjustments will in principle influence section 9.2.9, 9.2.10 and appendix 12.
For further information, please contact Nord Pool Clearing:  

Trond Svensgaard, head of risk management, 
phone +47 6710 8412/+47 9012 3679

Kristian Kloster, risk management, 
phone +47 6710 8415/+47 9593 1881