CME Group Plots Growth For Emissions-Focused Green Exchange
19 Giugno 2009 - 4:10PM
Dow Jones News
CME Group Inc. (CME) is moving forward with a carbon-trading
effort targeting emissions markets in the U.S. and Europe, readying
new products and pursuing exchange status for the long-gestating
venture.
The Chicago-based exchange operator this week announced new
European carbon contracts set to launch Monday on CME's ClearPort
platform, later shifting to the Green Exchange, a fledgling carbon
market aligned with CME's New York Mercantile Exchange unit.
The new contracts, intended to more closely match carbon
products traded on European markets, represent the first moves by
CME to develop the Green Exchange, also backed by the emissions
brokerage Evolution Markets and a handful of Wall Street banks.
"This was something that market participants were looking for,"
said Evan Ard, a spokesman for Evolution Markets.
CME inherited its interest in the New York-based Green Exchange,
first unveiled in December 2007, via the acquisition of Nymex last
year.
But trading activity on the Green Exchange platform, initiated
in March 2008, stalled as CME and Nymex worked through their
merger. The bank backers, including Credit Suisse (CS), JPMorgan
Chase & Co. (JPM) and Merrill Lynch, were sideswiped by the
financial crisis, and Constellation Energy Group (CEG), another
founding member, moved to sell some of its assets.
Meanwhile, the Chicago Climate Exchange, which dominates
on-exchange emissions trading in Europe, has gathered volume in the
U.S. This follows the development of the Regional Greenhouse Gas
Initiative in the Northeast and the election of President Obama, a
proponent of a cap-and-trade scheme for emissions - and a member of
the board that provided initial funding for CCX.
Now the Green Exchange venture looks to be moving ahead, as CME
works to secure exchange status with the Commodity Futures Trading
Commission in the U.S. and the Financial Services Authority in the
U.K.
"We're finally focused on it," said Leo Melamed, CME's chairman
emeritus, in a recent interview. "We see great potential, and we're
moving toward building on it."
As a new slate of products enters development, CME is talking to
buy- and sell-side participants in Europe to sell additional equity
stakes in the Green Exchange, according to Randy Warsager, vice
president of marketing for Nymex.
Warsager said CME's position as a stronghold of U.S. derivatives
trade gives it an edge against the Chicago Climate Exchange and
other carbon-focused competitors in Europe, including platforms
backed by NYSE Euronext (NYX), Nasdaq OMX Group Inc. (NDAQ) and
Deutsche Boerse AG's (DBOEF) futures unit Eurex.
"With energy [markets] in particular, there are cross-margining
and clearing efficiencies that will develop," Warsager said.
Gil Avidar, head of emissions sales for the Americas at Newedge
Group, said CME's recent moves were encouraging, "but they're
definitely coming from behind - the European Climate Exchange has
attracted a lot of volume."
Avidar said Europe will remain the current focus for carbon
investors, as algorithmic traders bring increased volume and open
interest to the market and a national U.S. cap-and-trade program
remains a few years off.
Brian Rice, principal of the Atrium Carbon Fund and a member of
both the Green Exchange and the Chicago Climate Exchange, said it
will take more than new contracts to convince him CME is really
getting behind the Green Exchange.
"Until they do, it isn't really a fight," he said.
-By Jacob Bunge, Dow Jones Newswires; 312-750-4117;
jacob.bunge@dowjones.com