Commodity derivatives

Commodities and emissions anatomy™ A handy guide to real-world stuff you can eat, burn, or virtue-signal about. Index: Click ᐅ to expand: ► Commodities ► Emissions Emissions Annex Anatomy Comments? Questions? Suggestions? Requests? Insults? We’d love to 📧 hear from you. Sign up for our newsletter.

You must have a taste for multi-dimensional chess if you want to understand what is required in the world of commodities, freight, weather derivatives and emission allowances. To wit:

• Actual emission allowances, resembling as they do abstract financial instruments, are in scope.
• Actual commodities, being consumable, perishable, paint ’em yellow ’n’ pass ’em off as copper, real-world things that people actually need to live, are out of scope.
• Emission allowances derivatives, whether physically- or cash-settled, are in scope.
• Cash-settled commodity derivatives — including ones where either party has an option to cash-settle — are in scope.
• Physically-settled commodity derivatives are out of scope ... unless they are traded on an EU trading venue, (i.e, OTC physically-settled commodity derivatives) in which case they are in scope ... unless they are “wholesale energy products traded on an OTF that must be physically settled” - which case they are out of scope.
• Physically-settled commodity derivatives which would otherwise be out of scope, if not used “for commercial purposes” and having “the characteristics of derivative financial instruments” are in scope.
• Weather derivatives, freight, inflation and economic indicator derivatives that can be cash-settled (it would be kind of fun having physically-settled weather derivatives wouldn’t it) are in scope.