Calendar Spreads
The ECX offers one-klick calendar spreads in ECX CER futures contracts.
Participants can use calendar spreads to capitalize on the idea that the price of Certified Emission Reduction units (CERs) - the underlying physical product upon which ICE ECX CER Contracts are based - will change in a specific way between two expiration dates. One-click calendar spreads makes it easy for traders to take advantage of a perceived price difference between two contract months, for example CER Dec09 and CER Dec10, and avoid legging risk.
Calendar spreads are set out in a similar format to the trading screen which appears on the ICE Platform. The spreads are quoted with the front expiry first (e.g. Dec 09 - Dec 10).
A spread trade is considered two separate trades for the purposes of exchange transaction fees and ICE Clear Europe clearing fees.
CER/EUA spread trade facility
The ECX offers a one-click CER-EUA spread trading facility between ICE ECX EUA Futures and CER Futures Contracts. The spread trade facility is available for the five December contract months from 2008 out to 2012. The spread will not be implied i.e. not derive numbers from the outright prices. In WebICE (electronic trading software on ICE Futures platform), the Market Type will be ‘ECX EUA/CER Futures Spread’ and the Product Name will be ‘ECX CER/EUA Spr’.
The CER/EUA spread offers an easy and accessible way to trade the differential between these correlated emissions markets on the ICE platform, and it is worth noting that a 79% margin offset is applied between CERs and EUAs. Using this spread facility means that traders can never be ‘legged up’ as transactions in both contracts are made simultaneously. As the tool is not implied there are opportunities for those who can identify pricing anomalies between the quoted spread price and the two markets.
The price of the spread will be quoted in terms of the discount from, or premium to, EUA Futures, i.e. CER Futures minus the EUA Futures. For example, when the Dec 08 spread is priced at -3.00 it means the price of the Dec 08 CER Futures is €3.00 less than the EUA Futures.
For the avoidance of doubt, the ECX EUA/CER Futures Spread is not a Contract in its own right but rather will result in simultaneous transactions in EUA Futures (“the EUA Leg”) and CER Futures (“the CER Leg”). The separate Legs of the spread will be priced by using the current system anchor price for the CER Leg and applying the traded differential to derive the price of the EUA Leg.
NB - Clearing limits for the ECX EUA/CER Futures Spread are distinct from those of the underlying Futures. Members and their customers will therefore need to ensure that they have the necessary clearing limits in place to trade the ECX CER/EUA Futures Spread. The ECX EUA/CER Futures Spread can be added to any WebICE portfolio which contains either EUA Futures or CER Futures. Participants who access the market through Trayport, TT or another ISV should contact that ISV directly.
Click here to access the CER-EUA spread trade facility data.
Click here to download - ICE Circular 08 091 - eua cer spread trade facility - 15 October 2008
Click here to download - CER/EUA Spread Trade Functionality Manual
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