ICE to launch options on UK Carbon Emission Allowances

Rick Steves

Since the launch of the UKA futures contract in May 2021, roughly 775 million tonnes of carbon dioxide equivalent gas have traded on ICE through the UKA contract, while open interest has grown to the equivalent of approximately 47 million tonnes.

Intercontinental Exchange (ICE) has announced plans to launch options on UK Carbon Emission Allowances (UKA Options) on October 10, 2022, subject to regulatory approval.

ICE expects to list UKA Options out to March 2024, with the underlying contract being the December UKA futures contract for the relevant year (i.e. the underlying contract for the March 2023 options will be the December 2023 UK Carbon Allowance future).

Tool to manage carbon emissions price risk

Gordon Bennett, Managing Director of Utility Markets at ICE, said: “The launch of UK Carbon Options follows the successful launch of the UK carbon market last year and should provide a meaningful new tool for our customers to manage carbon emissions price risk. Each day, ICE’s global environmental markets provide price signals for negative and positive externalities to help conserve the world’s carbon budget. Environmental considerations are touching a much wider spectrum of companies who will need to manage emissions pricing in their business models as part of their net zero commitments.”

The exchange group launched UK carbon allowance futures in May 2021 and emissions auctions on behalf of the UK Government as part of the UK’s new emissions trading scheme.

Each lot of UK Carbon Allowance futures is equivalent to 1000 UK Allowances where each allowance equals an entitlement to emit one tonne of carbon dioxide equivalent gas.

Since launch, roughly 775 million tonnes of carbon dioxide equivalent gas have traded on ICE through the UKA contract, while open interest has grown to the equivalent of approximately 47 million tonnes.

The UKA Futures Contract is a deliverable contract where each Clearing Member with a position open at cessation of trading for a contract month is obliged to make or take delivery of UK Allowances (UKAs) to or from the UK Emissions Trading Registry in accordance with the ICE Futures Europe Regulations.

The contracts are physically settled and delivered by the transfer of the UKAs from the seller’s account to the buyer’s account at the UK Emissions Trading Registry. All transfers always pass through clearing members’ account and ICE Clear Europe. Delivery takes place 3 days after the last trading day.

 

  • Read this next

    Retail FX

    Weekly Roundup: FX prop firms switch to cTrader, who moved $1.35B BTC?

    The foreign exchange and cryptocurrency markets are always active, and this past week was no exception. Stay ahead with a selection of essential stories and updates that matter most to market participants.

    Digital Assets

    Bitcoin breaks all records with a massive $1.347 billion transaction

    This transaction has surpassed previous records, setting a new benchmark for Bitcoin trades. Before this event, the largest Bitcoin transactions included a $1.1 billion trade in April 2020 involving 161,500 BTC, and other significant transactions ranging from $491 million to $1.033 billion throughout 2019 and 2020.

    Digital Assets

    Uniswap debuts Ethereum ‘uni.eth’ subdomains

    Decentralized exchange platform Uniswap has integrated Ethereum Name Service (ENS), allowing users to create human-readable domain names and cryptocurrency wallet addresses using .eth endings.

    Web3

    Magic Square Expands with TruePNL Acquisition

    Binance’s web3 app store, Magic Square, acquired token platform TruePNL in a cash deal this week for an undisclosed sum. The deal brings TruePNL’s infrastructure (excluding branding & token) under Magic Square’s wing. Initially seeking a partnership, Magic Square opted for a full acquisition.

    Crypto Insider

    The Future of Prediction Markets? Zeitgeist Launches Decentralized Court System

    Polkadot-powered prediction market protocol Zeitgeist has announced the launch of its latest innovation: a decentralized court system.

    Digital Assets

    Crypto exchange Kraken fires back at SEC lawsuit, claiming overreach

    Crypto exchange Kraken is pushing back against the U.S. Securities and Exchange Commission (SEC), seeking to toss out a lawsuit that accused the platform of operating without proper registration.

    Industry News

    Exness Named a Best Place to Work in 2024

     Global leader Exness, tops in retail trading volume, earns 2024 “Best Place to Work” award, cementing its employee-centric culture after three prior years of winning the Cyprus national title.

    Digital Assets

    Swan Bitcoin taps Bakkt for crypto offering in the US

    “We are thrilled to be taking this exciting step forward in our partnership with Swan. This is just the beginning of our collaboration, as we intend to explore further growth opportunities together in the future, including expansion into international markets.”

    Digital Assets

    Polkadot Awards Bifrost a 500,000 DOT Loan to Enhance Liquid Staking Adoption

    Bifrost, a leader in liquid staking solutions, has secured a 500,000 DOT loan from Polkadot’s treasury to expand the reach and utility of its vDOT product within the ecosystem.

    <