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2007 EFET General Agreement
Version 2.1(a) (Power)
A Jolly Contrarian owner’s manual™
Delivery in a Nutshell™
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- § 4.1 Delivery, Acceptance and Scheduling Obligations.
- (a) Seller shall Schedule, sell and Transfer to Buyer, or, if applicable in accordance with the relevant provision of § 4.1(a)(i) and 4.1(a)(ii), cause to be Transferred, and Buyer shall Schedule, purchase and accept Transfer of, or, if applicable in accordance with the relevant provision of § 4.1(a)(i) and 4.1(a)(ii), cause such Transfer to be accepted, the Contract Quantity at the Delivery Point, and the Buyer shall pay to the Seller the relevant Contract Price. Unless the Parties otherwise agree, the Seller shall Transfer the Contract Quantity at the Delivery Point during a Delivery Business Day between the hours of 10:00 a.m. and 4:00 p.m. CET and any Transfer taking place at a time after 4:00 p.m. CET on a Delivery Business Day shall be deemed to have taken place at 10:00 a.m. CET on the next Delivery Business Day.
- (i) For any Allowance Transaction in which no Transfer Point has been specified by the Seller, the Seller shall Transfer, or cause the Transfer of, the Contract Quantity to the Delivery Point from any Holding Account in any Registry.
- (ii) Parties may limit the scope of their Transfer and acceptance of Transfer obligations by designating one or more specific Delivery Points and/or Transfer Points for any Allowance Transaction:
- A. If one or more Delivery Points are specified by the Parties in respect of an Allowance Transaction, the Seller’s obligations shall be limited to the obligation to Schedule, sell and Transfer to Buyer, or cause to be so Transferred, and the Buyers’s obligations shall be limited to the obligation to Schedule, purchase and accept Transfer of, the Contract Quantity at the Delivery Point(s) so specified.
- B. If one or more Transfer Points are specified by the Seller in respect of an Allowance Transaction, the Seller’s obligations shall be limited to the obligation to Schedule, sell and Transfer to Buyer and the Buyer’s obligations shall be limited to the obligation to Schedule, purchase and accept Transfer of, or cause to be accepted such Transfer of, the Contract Quantity from the Transfer Point(s) so specified.
- C. Where a Party, in its capacity as Buyer, has specified one or more Delivery Point(s), the other Party will, without delay, nominate each such Holding Account(s) specified by the Buyer as a 'trusted account' (for the purposes of the Registries Regulation) for each of its own Transfer Points.
- (b) Where the Parties have agreed upon a list of multiple Delivery Points and/or multiple Transfer Points for an Allowance Transaction:
- (i) the Delivery Points so specified shall be deemed to be listed in descending order of preference such that the Delivery Point for the Allowance Transaction shall be the first Holding Account so listed, unless the Seller is prevented from Transferring to that Delivery Point by an event which would be either an event of Force Majeure or a Suspension Event if that were the only Delivery Point specified by the Party affected by the event, in which case the Delivery Point shall be the next listed Delivery Point that can accept Transfer of Allowances, until such list of Delivery Points has been exhausted; and
- (ii) Seller shall have discretion to Transfer to Buyer the Contract Quantity on the Delivery Date from any one or more of the Holding Accounts which have been specified as Transfer Points in respect of Seller; provided, however, that where the Seller is prevented from Transferring from a Transfer Point by an event which would be either an event of Force Majeure or a Suspension Event if that were the only Transfer Point specified by the Party affected by the event, the Seller shall select another listed Transfer Point from which to Transfer the Contract Quantity to the Buyer on the Delivery Date, until such list of Transfer Points has been exhausted;
- (c) Where the Parties have agreed upon a list of multiple Transfer Points and/or Delivery Points for an Allowance Transaction:
- (i) Buyer may later:
- A. amend the order of preference in which the Delivery Points are listed; and/or
- B. nominate an additional Delivery Point;
- provided that, in each case, Buyer notifies Seller no less than thirty (30) calendar days prior to the relevant Delivery Date and Seller consents thereto in writing on or before the day that is five (5) Delivery Business Days after receiving such notice from Buyer; and
- (ii) Seller may later:
- A. nominate an additional Transfer Point without Buyer’s consent provided that Seller notifies Buyer of such nomination in writing on or before the day that is ten (10) Delivery Business Days prior to the relevant Delivery Date.
- (d) For the avoidance of doubt, specifying Delivery Point(s) and/or Transfer Point(s) in respect of any particular Allowance Transaction for purposes of this § 4.1 need not preclude the Parties from designating different Holding Accounts than the Physical Settlement Netting Accounts specified for the purposes of § 4.3 (Physical Settlement Netting) in Part II of this Allowances Appendix.
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Comparison
Resources and Navigation
Index: Click ᐅ to expand:
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Overview
The same broad concept is dealt with as follows:
Summary
Settlement (ISDA), Scheduling (EFET), Primary Obligation (IETA) — the core provision that sets out who pays what, where and to whom, for Option Transactions and Forward Transactions.
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 “Payment 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”?
There is a distinction between the “Number of Allowances” — effectively the notional size of the whole trade — and the “Allowances to be Delivered” — the portion of it that is settling on any given day. The difference is that American options can settle in part, on any day in the term of the Transaction. Forwards typically don’t — they all settle on a pre-agreed settlement date
(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 in the emissions trading world. 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 — one’s eligibility for EMIR, and as such hedge exemptions, might depend on whether the forward is able to be cash-settled, 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.)
Transfer from a specified Holding Account
Curious conditionality, across all three versions, where the Template:Efetaprov DP 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 Template:Efetaprov RP’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.
Agreement specific points
EFET
Delivery Points and Transfer Points
In order to shoehorn the Emissions product into the EFET Master Agreement architecture — being a power and gas trading document, it thinks in terms of grid injections and inputs and outputs to a set network of pipes and cables — the EFET Allowances Appendix calls the Holding Accounts “Delivery Points” (for the Seller’s Holding Account) and “Transfer Points” for the Buyer’s Holding Accounts). It also, variously, calls them Holding Accounts too, by the way, but worth mentioning.
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- JC’s “nutshell” summary of the clause
- Background reading and long-form essays
- More on the curious limitation to deliver from a specified Holding Account
- Klaxon — basis risk between the documentation formats
See also
Template:Emissions Delivery sa
References
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2007 EFET General Agreement
Version 2.1(a) (Power)
A Jolly Contrarian owner’s manual™
4.1 in a Nutshell™
|
The JC’s Nutshell™ summary of this term has moved uptown to the subscription-only ninja tier. For the cost of ½ a weekly 🍺 you can get it here. Sign up at Substack.
| 4.1 in all its glory
- § 4.1 Delivery, Acceptance and Scheduling Obligations.
- (a) Seller shall Schedule, sell and Transfer to Buyer, or, if applicable in accordance with the relevant provision of § 4.1(a)(i) and 4.1(a)(ii), cause to be Transferred, and Buyer shall Schedule, purchase and accept Transfer of, or, if applicable in accordance with the relevant provision of § 4.1(a)(i) and 4.1(a)(ii), cause such Transfer to be accepted, the Contract Quantity at the Delivery Point, and the Buyer shall pay to the Seller the relevant Contract Price. Unless the Parties otherwise agree, the Seller shall Transfer the Contract Quantity at the Delivery Point during a Delivery Business Day between the hours of 10:00 a.m. and 4:00 p.m. CET and any Transfer taking place at a time after 4:00 p.m. CET on a Delivery Business Day shall be deemed to have taken place at 10:00 a.m. CET on the next Delivery Business Day.
- (i) For any Allowance Transaction in which no Transfer Point has been specified by the Seller, the Seller shall Transfer, or cause the Transfer of, the Contract Quantity to the Delivery Point from any Holding Account in any Registry.
- (ii) Parties may limit the scope of their Transfer and acceptance of Transfer obligations by designating one or more specific Delivery Points and/or Transfer Points for any Allowance Transaction:
- A. If one or more Delivery Points are specified by the Parties in respect of an Allowance Transaction, the Seller’s obligations shall be limited to the obligation to Schedule, sell and Transfer to Buyer, or cause to be so Transferred, and the Buyers’s obligations shall be limited to the obligation to Schedule, purchase and accept Transfer of, the Contract Quantity at the Delivery Point(s) so specified.
- B. If one or more Transfer Points are specified by the Seller in respect of an Allowance Transaction, the Seller’s obligations shall be limited to the obligation to Schedule, sell and Transfer to Buyer and the Buyer’s obligations shall be limited to the obligation to Schedule, purchase and accept Transfer of, or cause to be accepted such Transfer of, the Contract Quantity from the Transfer Point(s) so specified.
- C. Where a Party, in its capacity as Buyer, has specified one or more Delivery Point(s), the other Party will, without delay, nominate each such Holding Account(s) specified by the Buyer as a 'trusted account' (for the purposes of the Registries Regulation) for each of its own Transfer Points.
- (b) Where the Parties have agreed upon a list of multiple Delivery Points and/or multiple Transfer Points for an Allowance Transaction:
- (i) the Delivery Points so specified shall be deemed to be listed in descending order of preference such that the Delivery Point for the Allowance Transaction shall be the first Holding Account so listed, unless the Seller is prevented from Transferring to that Delivery Point by an event which would be either an event of Force Majeure or a Suspension Event if that were the only Delivery Point specified by the Party affected by the event, in which case the Delivery Point shall be the next listed Delivery Point that can accept Transfer of Allowances, until such list of Delivery Points has been exhausted; and
- (ii) Seller shall have discretion to Transfer to Buyer the Contract Quantity on the Delivery Date from any one or more of the Holding Accounts which have been specified as Transfer Points in respect of Seller; provided, however, that where the Seller is prevented from Transferring from a Transfer Point by an event which would be either an event of Force Majeure or a Suspension Event if that were the only Transfer Point specified by the Party affected by the event, the Seller shall select another listed Transfer Point from which to Transfer the Contract Quantity to the Buyer on the Delivery Date, until such list of Transfer Points has been exhausted;
- (c) Where the Parties have agreed upon a list of multiple Transfer Points and/or Delivery Points for an Allowance Transaction:
- (i) Buyer may later:
- A. amend the order of preference in which the Delivery Points are listed; and/or
- B. nominate an additional Delivery Point;
- provided that, in each case, Buyer notifies Seller no less than thirty (30) calendar days prior to the relevant Delivery Date and Seller consents thereto in writing on or before the day that is five (5) Delivery Business Days after receiving such notice from Buyer; and
- (ii) Seller may later:
- A. nominate an additional Transfer Point without Buyer’s consent provided that Seller notifies Buyer of such nomination in writing on or before the day that is ten (10) Delivery Business Days prior to the relevant Delivery Date.
- (d) For the avoidance of doubt, specifying Delivery Point(s) and/or Transfer Point(s) in respect of any particular Allowance Transaction for purposes of this § 4.1 need not preclude the Parties from designating different Holding Accounts than the Physical Settlement Netting Accounts specified for the purposes of § 4.3 (Physical Settlement Netting) in Part II of this Allowances Appendix.
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Comparison
Resources and Navigation
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Overview
This is the corresponding provision to (d)(i)(2) of the ISDA EU Emissions Annex and 5.1(c) of the IETA Master Agreement.
Summary
Settlement (ISDA), Scheduling (EFET), Primary Obligation (IETA) — the core provision that sets out who pays what, where and to whom, for Option Transactions and Forward Transactions.
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 “Payment 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”?
There is a distinction between the “Number of Allowances” — effectively the notional size of the whole trade — and the “Allowances to be Delivered” — the portion of it that is settling on any given day. The difference is that American options can settle in part, on any day in the term of the Transaction. Forwards typically don’t — they all settle on a pre-agreed settlement date
(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 in the emissions trading world. 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 — one’s eligibility for EMIR, and as such hedge exemptions, might depend on whether the forward is able to be cash-settled, 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.)
Delivery Points and Transfer Points
In order to shoehorn the Emissions product into the EFET Master Agreement architecture — being a power and gas trading document, it thinks in terms of grid injections and inputs and outputs to a set network of pipes and cables — the EFET Allowances Appendix calls the Holding Accounts “Delivery Points” (for the Seller’s Holding Account) and “Transfer Points” for the Buyer’s Holding Accounts). It also, variously, calls them Holding Accounts too, by the way, but worth mentioning.
Transfer from a specified Holding Account
Curious conditionality, across all three versions, where the Buyer 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 Seller’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.
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
- More on the curious limitation to deliver from a specified Holding Account
- Klaxon — basis risk between the documentation formats
See also
Template:M sa EFET Allowance Annex 4.1
References