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Citing ‘current liquidity pressures’ in EU energy markets and the need to provide market participants with ‘more options regarding the assets they provide to the clearing house as margin cover’ , ICE Clear Europe has proposed changes to its rules that would make EU Emission Allowances (EUAs) allowable margin collateral for net short EUA futures positions (i.e. forward contracts). term on issues for which EUAs are deliverable as settlement at expiry). Valuation of the EUA guarantee will be subject to discounts, as determined by ICE Clear EU in its discretion. Eligible Clearing Members will be able to use EUAs to collateralize both Proprietary and Client positions in EUA Futures.
Notably, the new collateral option will not be available to FCM clearing members of ICE Clear EU. ICE’s regulatory filing does not specify the rationale for this exclusion. ICE Clear’s EU rules provide that margin guarantees may be provided by FCM clearing members to the clearinghouse as security pursuant to the terms of a New York law security agreement. ; in contrast, non-FCM Clearing Members provide margin collateral per title transfer in accordance with English law title transfer requirements. ICE Clear EU may have judged the legal uncertainty around the New York law analysis of an EUA pledge, and how a security interest created under such a pledge is perfected , too large to justify extending the new functionality to FCM clearing members.
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