Template:M summ EUA Annex (d)(i)(1)

Who pays what, where and to whom, for {{{{{1}}}|Option Transaction}}s and {{{{{1}}}|Forward Transaction}}s.

The JC is no great fan of definitions, but God only knows, in the ISDA one would have come in handy here. You know, a “Purchase Amount” for Forward Transactions, or a “Strike Amount” for Option Transactions (or a “Transaction Amount”, for both) might have been nice, given they are the key concepts in Option Transactions and Forward Transactions.

As for Allowances to be Delivered — okay, there is at least a term for the physical half of that, but it’s rubbish. What about “Delivery Amount”?

(To be fair to the Emissions ninjas at IETA, they do have this concept: “Contract Amount”).

Well, the JC has introduced these words into the nutshell summary to make life a bit easier to follow. Just remember they are not there in the real thing. Unless you put them in.

Cash Settlement: Trick question. There is no provision for cash-settlement under the ISDA Emissions Annex. Will that stop counterparties asking you to specify a settlement method? Probably not. Does it matter? Also probably not. What if you want a cash settlement option? Not out of the ballpark — ones eligibility for EMIR, and as such hedge exempotions, might depend on whether the forward is cash settlable, in theory, or not. There is no good reason for this: it springs from the paranoid brow of those toiler legal counsel who trying to parse the eligibility or Emissions derivatives under the refitted delegated regulations of MiFID 2 — our advice is just don’t go there — but you just never know.