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Secondary Market Digest
© CaliforniaCarbon.info [email protected] 1
CaliforniaCarbon.info Cap-and-Trade Secondary Market Digest Oct 9th 2018
PRICE PANEL
Spot$15.27($0.07)
These reflect monthly price changes (Aug 31st – Sept 28th ). Visit http://californiacarbon.info/cca/ for the latest pricing info.
OTC V18 Front$15.30($0.08)
OTC V18 Dec 18$15.43($0.01)
Brokers
ICE Front*$15.28($0.11)
ICE V18 Dec 18$15.50($0.03)
ICE V18 Oct 18$15.33($0.06)
ExchangeICE V18 Dec 20$16.99($0.01)
Other publications
ANALYST CONTACT
Abhilasha Fullonton ([email protected])
Phone: +1 (415) 349 5777 (US)
Premium Bulletin (last published Oct 8th)
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Contents
Front Matter 1
Prices Overview 2
Forward Curves 3
Vintage Comparison 4
ICE Volume & OI Breakdown 5
OTC – ICE Comparison 6
Funding Rates & Offset Discounts 7
Back Matter 8
* The front switched from Sept to Oct on 26th Sept
Contents
Front Matter 1
Key Summary 2
Prices Overview 3
Forward Curves 4
Vintage Comparison 5
ICE Volume & OI Breakdown 6
OTC – ICE Comparison 7
Funding Rates & Offset Discounts 8
Back Matter 9
ICE V18 Dec 19$16.28($0.08)
ICE V20 Dec 18$15.46($0.03)
Monthly Review
© CaliforniaCarbon.info [email protected] 2
KEY SUMMARY
CaliforniaCarbon.info Cap-and-Trade Secondary Market Digest Oct 9th 2018
Monthly ReviewCCA front (V18 Sep18), Spot price, V18 Oct18 (Advance) and OTC Dec18 all saw similar movement throughout the month. At the beginning all deliveries were quiet stable seeing a gradual increase from 3rd Sept onwards and coming back down mid-month. Spot price and front price mirrored each other the most as they experience sudden increase towards the end of the month. Front price peaked at USD 15.47 on the 28th Sept while Spot price and OTC Dec 18 plateaued at the beginning of the month.
Volume & OIIn September trades totalled up to 51.8 million tons. Trades decreased and increased in line with price movements. As prices started increasing trades decreased and vice versa. The penultimate week, the cap and trade market saw the highest trades at 35.5 million tons. Entities are evidently rolling their trades to latter deliveries, most from Compliance Period 2 to Compliance Period 3 as entities begin to prepare for CP 3’s first surrender at the end of 2019. A total of 5.4 million OI contracts closed over the last month with V2018 seeing 9.4 million closed contracts. Both V2019 and V2020 saw significant increase in OI over the month withan additional 3.8 million and 4.7 million contracts respectively.
CCO & ICEVibration analysis suggests both CCA and OTC benchmark prices varied throughout the month. Bid and ask differentials have continued to decrease especially for benchmark and broker spot as they converged at USD 0.06 mark. While V19 Dec19 saw a 15 cent difference between bid and ask price. The discount factor for golden CCOs down to 6.50% in September which is a 0.78% decrease over a month. CCO-8 also a dip in the discount factor. It currently stands at 8.68% (in September) from 10.05% in August which is an 1.37% dip over a month. Quite predictably continuing with this years lowering discount factors, it continued to trend below 20% threshold for CCO-8s.
© CaliforniaCarbon.info [email protected] 3
SECONDARY MARKET DIGEST
CCA V2018 Prices, Sept 2018Visit http://californiacarbon.info/cca/ for the latest pricing information
CCA V2020 Prices, Sept 2018PRICES OVERVIEW
V18 CCA ICE Front Brokers' Spot OTC
FrontOTCDec18
ICEDec18
ICE Dec19
ICEDec20
Monthly ∆ 0.13 0.06 0.08 0.01 0.03 0.09 0.066-Month ∆ 0.53 0.72 0.53 0.34 0.47 0.70 0.79
Monthly Range 0.15 0.14 0.12 0.08 0.11 0.11 0.17
6-Month Range 0.62 0.78 0.64 0.48 0.61 0.81 0.99
Largest Daily ∆ (Sept18)
0.05 0.04 0.05 0.02 0.03 0.06 0.06
27-Sep 9-Sep 26-Sep 4-Sep 4-Sep 4-Sep 4-Sep
Largest Daily ∆ (last 6 months)
0.08 0.07 0.09 0.04 0.07 0.07 0.07
16-May 29-Aug 15-Jun 18-May 18-Jun 18-Jun 18-Jun
Average absolute daily ∆ (Sept18) 0.018 0.016 0.016 0.008 0.015 0.016 0.022
Average absolute daily ∆ (last 6
months)0.016 0.016 0.021 0.013 0.016 0.016 0.018
V20 CCA ICE Front
ICEDec18
ICE Dec19
ICEDec20
Monthly ∆ 0.11 0.01 0.07 0.186-Month ∆ 0.53 0.47 0.70 0.93
Monthly Range 0.14 0.10 0.09 0.226-Month Range 0.62 0.60 0.80 1.05
Largest Daily ∆ ( Sept18)0.05 0.03 0.04 0.06
27-Sep 6-Sep 25-Sep 14-Sep
Largest Daily ∆ (last 6 months)
0.08 0.07 0.08 0.08
16-May 23-May 23-May 18-Jun
Average absolute daily ∆ (Sept18) 0.016 0.014 0.016 0.018
Average absolute daily ∆ (last 6 months) 0.016 0.016 0.016 0.019
CaliforniaCarbon.info Cap-and-Trade Secondary Market Digest Oct 9th 2018
15.20
15.25
15.30
15.35
15.40
15.45
15.50
15.55
31-A
ug
2-Sep
4-Sep
6-Sep
8-Sep
10-S
ep12
-Sep
14-S
ep16
-Sep
18-S
ep20
-Sep
22-S
ep24
-Sep
26-S
ep28
-Sep
Pric
e ($
)
ICE Front Spot Advance OTC Dec 18
15.0015.2515.5015.7516.0016.2516.5016.7517.0017.25
31-Aug
2-Sep4-Sep
6-Sep8-Sep
10-Sep
12-Sep
14-Sep
16-Sep
18-Sep
20-Sep
22-Sep
24-Sep
26-Sep
28-Sep
Pric
e ($
)
ICE Front ICE Dec 18
© CaliforniaCarbon.info [email protected] 4
SECONDARY MARKET DIGEST
ICE V2017Visit http://californiacarbon.info/cca/ for the latest pricing information
ICE V2018FORWARD CURVES
ICE V2019 ICE V2020
CaliforniaCarbon.info Cap-and-Trade Secondary Market Digest Oct 9th 2018
14.50
15.00
15.50
16.00
16.50
17.00
17.50
18.00
18.50
Dec 18 Dec 19 Dec 20 Dec 21
Price
s (in
$)
Delivery Month 31-Jul-18 31-Aug-18 28-Sep-18
14.50
15.00
15.50
16.00
16.50
17.00
17.50
18.00
18.50
19.00
Dec 18 Dec 19 Dec 20 Jul 21 Dec 21
Price
s (in
$)
Delivery Month 31-Jul-18 31-Aug-18 28-Sep-18
14.50
15.00
15.50
16.00
16.50
17.00
17.50
18.00
18.50
Dec 18 Mar 19 Jun 19 Sep 19 Dec 19 Dec 20 Dec 21
Price
s (in
$)
Delivery Month 31-Jul-18 31-Aug-18 28-Sep-18
14.50
15.00
15.50
16.00
16.50
17.00
17.50
18.00
18.50
Dec 18 Mar 19 Jun 19 Sep 19 Dec 19 Dec 20 Dec 21
Price
s (in
$)
Delivery Month 31-Jul-18 31-Aug-18 28-Sep-18
© CaliforniaCarbon.info [email protected] 5
SECONDARY MARKET DIGESTVisit http://californiacarbon.info/cca/ for the latest pricing information
VERTICAL SPREADSICE V17/V18 ICE V19/V18
CaliforniaCarbon.info Cap-and-Trade Secondary Market Digest Oct 9th 2018
ICE V20/V18
*Vertical spreads are calculated by comparing secondary market price of selected deliveriesfrom V2017, V2019 and V2020 against current vintage i.e. V2018. The x-axis shows thecalendar month and the y-axis shows differentials. The graph consist of a value that is simplyextracted by subtracting front price of one vintage against the front price of another. e.g.V2019 Dec 18 price – V18 Dec 18 gives us price differentials between V2019 and V2018.
**Prices for all deliveries taken at the end of the calendar month.
-0.02
-0.02
-0.01
-0.01
0.00
0.01
0.01
0.02
0.02
Jun-18 Jul-18 Aug-18 Sep-18Diffe
rent
ial
Front Dec 18 Dec 19 Dec 20 Dec 21-0.03
-0.02
-0.01
0.00
0.01
0.02
Jun-18 Jul-18 Aug-18 Sep-18
Diffe
rent
ial
Front Dec 18 Dec 19 Dec 20 Dec 21
-0.02
-0.02
-0.01
-0.01
0.00
0.01
0.01
0.02
0.02
Jun-18 Jul-18 Aug-18 Sep-18
Diffe
rent
ial
Front Dec 18 Dec 19 Dec 20 Dec 21
© CaliforniaCarbon.info [email protected] 6
SECONDARY MARKET DIGESTVisit http://californiacarbon.info/cca/ for the latest pricing information
ICE BREAKDOWNICE traded volume, by delivery lead times
Open interest by vintage (Aug & Sept)* Open interest by delivery (Aug & Sept)* * OI on 09/20/18
CaliforniaCarbon.info Cap-and-Trade Secondary Market Digest Oct 9th 2018
0 10000 20000 30000 40000 50000 60000 70000
SeptemberOctober
NovemberDecember
JanuaryFebruary
MarchAprilMay
JuneJuly
AugustSeptember Prompt
+1M+2M+3M+4M+5M+6M+7M+8M+9M+10M+11M+1Y+2Y+3Y
0
10
20
30
40
50
60
70
80
Augu
st
Sept
embe
r
Augu
st
Sept
embe
r
Augu
st
Sept
embe
r
Augu
st
Sept
embe
r
Augu
st
Sept
embe
r
Augu
st
Sept
embe
r
V2015 V2016 V2017 V2018 V2019 V2020
Open
Inte
rest
('00
0's)
Dec-20
Sep 19
Dec 19
Dec 18
Oct 18
Sep 180
10
20
30
40
50
Augu
st
Sept
embe
r
Augu
st
Sept
embe
r
Augu
st
Sept
embe
r
Augu
st
Sept
embe
r
Augu
st
Sept
embe
r
Augu
st
Sept
embe
r
Sep 18 Oct 18 Dec 18 Sep 19 Dec 19 Dec 20
Open
Inte
rest
('000
's)
V2020
V2019
V2018
V2017
V2016
V2015
© CaliforniaCarbon.info [email protected] 7
SECONDARY MARKET DIGESTVisit http://californiacarbon.info/cca/ for the latest pricing informationOTC COMPARISONAverage daily bid-ask differentials, by instrument
Average daily ICE-OTC differentials**
**Calculated as average daily ICE closing minus average daily OTC bid-ask mean. A positive answer means OTCmedians were lower than ICE settles, and a negative answer means ICE settles were lower than OTC medians.
Vibration analysis***
***The primary axis tracks the average daily price change in absolute terms (i.e. logs value of all movements up anddown, even if value is retraced subsequently). The secondary axis expresses the relationship, for each trading month,between the sum total of the daily changes and the monthly gain/loss in absolute terms. The higher the ‘vibrationfactor’, the larger the amount of fluctuation within the month relative to the overall trend. However, positioning themonthly change as the denominator means the output is sensitive to the precise timing of price reactions. This chartmakes use of benchmark CCA values (V2017 Dec 17).
CaliforniaCarbon.info Cap-and-Trade Secondary Market Digest Oct 9th 2018
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
20.00
$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
Sep-17Oct-1
7Nov-17
Dec-17Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18Jul-18
Aug-18Sep-18
Vibr
ation
Fac
tor
Aver
age A
bsolu
te Da
ily P
rice C
hang
e
OTC Vibration Fa ctor ICE Vibra tio n Factor OTC Av. Absolute Daily ∆ ICE Av. Absolute Daily ∆
$0.00
$0.02
$0.04
$0.06
$0.08
$0.10
$0.12
$0.14
$0.16
Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18Brokers ' Spot Benchmark V19 Dec 19
-0 .08-0 .06-0 .04-0 .020.000.020.040.060.080.100.12
Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18
Front ICE-Broker Spot Benchmark - Broker Benchmark
© CaliforniaCarbon.info [email protected] 8
SECONDARY MARKET DIGEST
ICE V2018Visit http://californiacarbon.info/cca/ for the latest pricing information
ICE V2020IMPLIED FUNDING RATES
OFFSET DISCOUNTSBenchmark ICE CCA-Golden CCO Benchmark ICE CCA-CCO-8
CaliforniaCarbon.info Cap-and-Trade Secondary Market Digest Oct 9th 2018
Delivery V18 Price on Sep 28
Sep 28 Annual Rate
Monthly Av. Annual Rate
3-Month Av. Annual Rate
6-month Av. Annual Rate Total Return
Front 15.47 NA NA NA NA NA
Dec 18 15.55 3.14% 4.14% 4.05% 4.00% 3.14%
Dec 19 16.38 5.34% 5.25% 4.79% 4.43% 3.49%
Dec 20 17.07 4.77% 4.92% 4.54% 4.24% 3.76%
Delivery V20 Price on Sep 28
Sep 28 Annual Rate
Monthly Av. Annual Rate
3-Month Av. Annual Rate
6-month Av. Annual Rate
Total Return
Front 15.43 NA NA NA NA NA
Dec 18 15.51 3.15% 4.17% 4.02% 3.80% 3.15%
Dec 19 16.34 5.54% 5.28% 4.93% 4.08% 3.50%
Dec 20 17.17 5.22% 5.13% 4.63% 3.97% 4.09%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
$1.80
Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18
Discou nt Value Discou nt Percentage
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18Discou nt Value Discou nt Percentage
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METHODOLOGY
The calculation of CCA OTC Bilateral and CCA Spot prices is conducted using a non-weighted average of broker price marks collected by Climate Connect. The averageis computed by dividing the summation of individual data values by the number of data sources. Access full methodology statement
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ABOUT CALIFORNIACARBON.INFO
CaliforniaCarbon.info is a news and data portal for the California cap and trade market. It is operated by Climate Connect Ltd, an online media firm established inLondon in 2010. With headquarters in London and in New Delhi, Climate Connect’s dedicated editorial, research, forecasting, and IT solutions desks have a globalreach that allows them to serve clients in four continents. Climate Connect’s distinguished board of advisors consists of high net-worth individuals in the Bay Area andin New Hampshire, who boast 40 years of cumulative experience in climate change markets. For more information, please visit http://www.climate-connect.co.uk/
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CaliforniaCarbon.info Cap-and-Trade Secondary Market Digest Oct 9th 2018