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| Originating department: | Commercial Services |
| Company Circular No: | LCH.Clearnet Ltd Circular No 2888 |
| Service Circular No: | LCH EnClear No 338 |
| Date: | 17 June 2011 |
| To: | All LCH.Clearnet EnClear Members |
Launch of Clearing Service for Emissions Options Contracts
LCH.Clearnet is pleased to announce that we will be launching clearing for Emissions Options contracts on 27 June 2011. These contracts will complement our existing EnClear service for Emissions forward contracts.
The service will allow for Emissions Options contracts, previously concluded by bilateral parties through OTC Brokers, to be registered with LCH.Clearnet for clearing. Contracts will be registered in ClearWay, and cleared through the ECS system.
All members currently approved by the Clearing House to clear Emissions Forward Contracts will automatically be eligible to clear Emissions Options Contracts.
Contract Specifications
| CER Options | |
| Description | Physically settled Premium Paid Option on the underlying CER Forward contract for the corresponding December expiry.
These contracts, if “in the money” expire into their underlying CER Forward contracts with a traded price equal to the Strike Price (see below) |
| Lot size | 1000 tonnes |
| Currency | Euro |
| Pricing | Euro and Euro cents per metric tonne |
| Minimum tick | €0.01 per tonne |
| Option type | Options are European style and will be automatically exercised on the expiry day if they are “in the money”. If an option is “out of the money” it will expire automatically. It is not permitted to exercise the option on any other day or in any other circumstances. No manual exercise is permitted. |
| Option premium | The Premium is paid at the time of purchase. |
| Last trading day | Contracts will expire at 18:00 hours UK time 3 business days prior to the last Monday of the options contract month.
Where the last Monday of the contract month is not a business day, or there is a non-business day in the four days following the last Monday of the contract month, then the expiry day will be 3 days prior to the second last Monday of the contract month. In cases where there is a non-business day in the four days following the second last Monday of the contract month, then the expiry day will be 3 days prior to the third last Monday of the contract month. |
| Expiry | 18:00 hours UK time on the last trading day
Automatic exercise settings are pre-set to exercise contracts which are one minimum price fluctuation or greater "in-the-money" when compared to the relevant reference price. Members are not permitted to override automatic exercise settings or manually enter exercise instructions for this contract. The reference price will be a price in Euros and Euro cents, equal to the daily settlement price for the December CER Forward contract for the corresponding year For these purposes “final settlement price” means the final settlement price on the expiry day of the underlying CER forward contract. |
| Contract series | Four rolling month contracts (March, June, September and December) plus an additional two December contracts.
All option contracts expire into the underlying December contract of the corresponding year. |
| Strike price | Fifty strike prices in increments of €0.50 above and below the “at-the-money” strike price in all contract series.
Where the “at the money” strike price of the underlying commodity moves, additional strikes will be added each business day. |
| Margin | Options will be subject to Initial Margin and Net Liquidation Value variation margin on a daily basis. |
| Business days | UK business days |
| EUA Options | |
| Description | Physically settled Premium Paid Option on the underlying EUA Forward contract for the corresponding December expiry.
These contracts, if “in the money” expire into their underlying EUA Forward contracts with a traded price equal to the Strike Price (see below) |
| Lot size | 1000 tonnes |
| Currency | Euro |
| Pricing | Euro and Euro cents per metric tonne |
| Minimum tick | €0.01 per tonne |
| Option type | Options are European style and will be automatically exercised on the expiry day if they are “in the money”. If an option is “out of the money” it will expire automatically. It is not permitted to exercise the option on any other day or in any other circumstances. No manual exercise is permitted. |
| Option premium | The Premium is paid at the time of purchase. |
| Last trading day | Contracts will expire at 18:00 hours UK time 3 business days prior to the last Monday of the options contract month.
Where the last Monday of the contract month is not a business day, or there is a non-business day in the four days following the last Monday of the contract month, then the expiry day will be 3 days prior to the second last Monday of the contract month. In cases where there is a non-business day in the four days following the second last Monday of the contract month, then the expiry day will be 3 days prior to the third last Monday of the contract month. |
| Expiry | 18:00 hours UK time on the last trading day
Automatic exercise settings are pre-set to exercise contracts which are one minimum price fluctuation or greater "in-the-money" when compared to the relevant reference price. Members are not permitted to override automatic exercise settings or manually enter exercise instructions for this contract. The reference price will be a price in Euros and Euro cents, equal to the daily settlement price for the December EUA Forward contract of the corresponding year For these purposes “final settlement price” means the final settlement price on the expiry day of the underlying EUA forward contract. |
| Contract series | Four rolling month contracts (March, June, September and December) plus an additional two December contracts
All option contracts expire into the underlying December contract of the corresponding year |
| Strike price | Fifty strike prices in increments of €0.50 above and below the “at-the-money” strike price in all contract series.
Where the “at the money” strike price of the underlying commodity moves, additional strikes will be added each business day. |
| Margin | Options will be subject to Initial Margin and Net Liquidation Value variation margin on a daily basis. |
| Business days | UK business days |
Contract Codes
| Contract | Contract Contract Code |
| EUA Options | EUO |
| CEO Options | CEO |
Contract Listing at Launch
| Contract | Expiry |
| EUO Sep - 11 | 21/09/2011 |
| EUO Dec - 11 | 14/12/2011 |
| EUO Mar - 11 | 21//03/2012 |
| EUO Jun - 11 | 20/06/2012 |
| EUO Dec - 12 | 12/12/2012 |
| EUO Dec - 13 | 11/12/2013 |
| CEO Sep - 11 | 21/09/2011 |
| CEO Dec - 11 | 14/12/2011 |
| CEO Mar - 12 | 21/03/2012 |
| CEO Jun - 12 | 20/06/2012 |
| CEO Dec - 11 | 12/12/2012 |
| CEO Dec - 13 | 11/12/2013 |
Fees
The clearing fees charged by LCH.Clearnet for the Emissions Options contracts will be €1.50 per lot. No settlement fees will be charged.
If you have any questions related to this circular, please do not hesitate to contact:
Isabella Kurek-Smith on +44 20 7426 7460 or [email protected]
Kind regards
Isabella Kurek-Smith
Director, Head of Energy and Freight