ECC to allow EU carbon permits as margin collateral

Reuters News
Posted: Nov 26, 2013 6:01 AM

LONDON (Reuters) - Germany-based clearing house European Commodity Clearing (ECC) will allow EU emission permits to be used as collateral for margin payments from December 2, it said, in a move that could boost liquidity on its partner exchange, EEX.

"Until the emission allowances are used as compliance instruments, our customers can make use of their stock of EU Allowances (EUAs) to reduce the capital commitment through other forms of collateral," said Thomas Siegl, ECC's chief risk officer, in an emailed statement on Monday.

ECC said the use of EUAs could be activated free of charge once it receives a joint statement from the trading participant and its clearing member.

Margins act as security payments for exchange-based trading. Allowing dealers to use their holdings of permits as collateral potentially frees up more capital to trade.

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ECC is the clearing partner of EEX, which aims to gain market share in carbon trade from Britain-based ICE Futures Europe, the market leader.

ICE handled 87 percent of European carbon trade in October, compared with EEX's share of 11 percent, according to data compiled by Reuters News.

(Reporting by Ben Garside; editing by Jane Baird)