For Immediate Release Wednesday, July 7, 2004
For More Information Contact: Louise Marshall, (212) 901-6000; lmarshall@isda.org
The confirmation is
designed to incorporate EU-allowance trading into the ISDA documentation
architecture. It enables firms to utilize their ISDA Master Agreements and,
later this year, the 2004 ISDA Commodity Definitions to trade
EU allowances. In the drafting process, ISDA consulted the International
Emissions Trading Association (IETA) on the emission-specific conditions that
apply in the EU ETS, as reflected in IETA’s Single
Trade Agreement, also published this week.
The ISDA and IETA forms are
intended for use by different types of market participant. The IETA Single
Trade Agreement derives from the IETA Emissions Trading Master Agreement
published last year and was developed to facilitate individual EU allowance
transactions between companies with limited trading capabilities. With the two
new confirmations, a larger range and number of participants will be able to
access the EU emissions market, and the availability of both forms is expected
to help build marketplace liquidity. The constructive dialogue between ISDA and
IETA is a significant benefit, minimizing any potential legal basis risk
between the documents available.
“The ISDA confirmation
combines the expertise of energy and emissions trading and financial
derivatives documentation,” said Stefan Judisch of
RWE Trading GmbH, a co-chair of ISDA’s Energy,
Commodities and Developing Products Committee in
By
May 2004, EU member states had to publish their national allocation plans to
determine the amount of EU-Allowances assigned to various industries within
their jurisdictions. This followed EU Emissions Directives 2003/87/EC (amending
Directive 96/61/EC) of October 2003, which is the legal basis of the EU ETS.
Firms are required to register their trading accounts in a member state
registry before they commence transferring EU-Allowances. Pre-compliance
trading of forwards on EU-Allowances is already underway.
IETA is a non-profit organization created in June
1999 to establish a functional international framework for trading greenhouse
gas emissions credits. Its 90 international members include leading
multinational companies from across the carbon trading cycle: emitters,
solution providers, brokers, insurers, verifiers, and law firms. IETA works for
the development of an active, global greenhouse gas market, consistent across
national boundaries. In doing so IETA focuses on the creation of systems and
instruments that will ensure effective business participation. Information
about IETA is available at www.ieta.org.
ISDA is the global trade
association representing leading participants in the privately negotiated
derivatives industry. ISDA was chartered in 1985, and today has more than 600
member institutions from 46 countries on six
continents. These members include most of the world's major institutions
that deal in privately negotiated derivatives, as well as many of the
businesses, governmental entities and other end users that rely on
over-the-counter derivatives to manage efficiently the financial market risks
inherent in their core economic activities.
Information about ISDA and its activities is available on the
Association's web site: www.isda.org.