For Immediate Release Wednesday, July 7, 2004

For More Information Contact: Louise Marshall, (212) 901-6000;


ISDA Publishes OTC Emissions Confirmation


NEW YORK, Wednesday, July 7, 2004 – The International Swaps and Derivatives Association (ISDA) has published a confirmation for use in privately negotiated, physically settled transactions in European Union emissions allowances (EU allowances). The emissions confirmation was designed to facilitate EU-allowance trading under the EU Emissions Trading Scheme (EU ETS), which becomes mandatory for certain industry sectors on January 1, 2005.


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 Europe. “It facilitates participation by financial institutions in nascent emissions allowance trading activity by providing as a base for such trades the legal infrastructure of ISDA documentation, including its netting capabilities.”


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


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:


®ISDA is a registered trademark of the International Swaps & Derivatives Association, Inc.