Physical Settlement - Emissions Annex Provision
|
EU Emissions Allowance Transaction Annex to the 2005 ISDA Commodity Definitions A Jolly Contrarian owner’s manual™
(d)(i) in all its glory
Comparison See our natty emissions comparison table between the IETA, EFET and ISDA versions of emissions trading docs
Resources and Navigation
|
Overview
Settlement
The same broad concept is dealt with as follows:
- ISDA: Settlement
- EFET: Delivery, Acceptance and Scheduling Obligations
- IETA: Primary Obligation
Situation normal... : Techy drafting slip from ISDA’s crack drafting squad™: “Number of Allowances to be Delivered” isn’t a thing: there is “Number of Allowances”, which is the notional size of the Transaction, and then there is Allowances to be Delivered which references the particular number of Allowances to be settled under an Option and thus already builds in a number.
Delivery
What counts as a delivery, when it is deemed completed, to which accounts and so on, and some curious over-description redolent of a bad used car salesman who really should have stopped talking, but found himself filling the uncomfortable silence with words which by their pregnancy compel him to complete his sentence, which in turn, he realises to his horror, compels him to confess mechanical flaws in the lemon he was really hoping you would drive off the lot with before discovering.
Summary
Settlement
Transfer from a specified Holding Account
Curious conditionality, across all three versions, where the Delivering Party specifies a Holding Account from which Allowances must be delivered, and not just the account to which they must be delivered. Quite why it should matter whence the Allowances come we cannot say — a vague fretfulness about theft perhaps? — but ok; let’s run with it.
Note, in any case, its moderation in IETA (5.2) whereby one has an obligation to make sure there are sufficient allowances in your account to satisfy your delivery obligation. So even though you can’t be forced to deliver from anywhere else, you can be sued for losses arising from your failure to ensure there was something to deliver in your Holding Account. All rather cack-handed, but in “fundamental upshot” terms, this does get to the right place.
The transfer is done once the Allowances hit the Receiving Party’s account (I know, I know: you don’t say.) But wait: there is an interesting use of the word “whereupon” here, upon which we dwell in a bit more detail in the premium section.
Delivery
All tediously quotidian, largely-goes-without-saying stuff, until you stumble over subparagraph (B) like an inattentive trail-runner not noticing a tree-root.
So:
(A)
Transfer from a specified Holding Account
Curious conditionality, across all three versions, where the Delivering Party specifies a Holding Account from which Allowances must be delivered, and not just the account to which they must be delivered. Quite why it should matter whence the Allowances come we cannot say — a vague fretfulness about theft perhaps? — but ok; let’s run with it.
Note, in any case, its moderation in IETA (5.2) whereby one has an obligation to make sure there are sufficient allowances in your account to satisfy your delivery obligation. So even though you can’t be forced to deliver from anywhere else, you can be sued for losses arising from your failure to ensure there was something to deliver in your Holding Account. All rather cack-handed, but in “fundamental upshot” terms, this does get to the right place.
The transfer is done once the Allowances hit the Receiving Party’s account (I know, I know: you don’t say.) But wait: there is an interesting use of the word “whereupon” here, upon which we dwell in a bit more detail in the premium section.
(B)
We’ll talk about (B) in the premium content section.
(C)
If the Receiving Party has designated multiple Specified Holding Accounts — as to why it would have multiple accounts, let alone specify them for a single Transaction we can provide no answer beyond basic bloody-minded perversity — but let’s just say — Delivering Party starts at the top and, if for some reason the first-named accounts are subject to some kind of disruption and the later ones are not — again, search us what might cause that — work its way down until it has delivered all EUAs. (If it gets to the bottom unfulfilled, see Settlement Disruption Event and Suspension Event).
(D)
If you deliver outside the normal window during business hours, your delivery is deemed satisfied at the next moment where a window on business hours opens. Workaday stuff that will be familiar with anyone who deals with the settlement of securities for a living.
But (B)? That’s weird. For more discussion on that, and a compare and contrast with the corresponding IETA provision, see the premium content.
Premium content
Here the free bit runs out. Subscribers click 👉 here. New readers sign up 👉 here and, for ½ a weekly 🍺 go full ninja about all these juicy topics 👇
|
- The JC’s famous Nutshell™ summary of this clause
- Why the effects of Settlement Disruption Event and Suspension Events differ: a hypothesis
- Reasonable efforts to overcome Settlement Disruption Events
See also
References
- ↑ If the form of Master Agreement in which this Part is included is a 1992 ISDA the parties should specify “Additional Termination Event” or, if the form of Master Agreement which the Confirmation supplements is an 2002 ISDA the parties should specify “Illegality”.
- ↑ We think this number is superfluous, in that there is not a (II).