Template:M summ EUA Annex (d)(i)(1): Difference between revisions

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

Revision as of 13:14, 17 October 2023

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[[(d)(i)(1) - Emissions Annex Provision|Who]] pays what, where and to whom, for {{euaprov|Option}} and {{euaprov|Forward}} {{euaprov|Transaction}}s.
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 they would have come in handy here. You know, a “'''{{euaprov|Purchase Amount}}'''” for {{euaprov|Forward Transaction}}s, and a “'''{{euaprov|Strike  Amount}}'''” for {{euaprov|Option Transaction}}s might have been nice, given they are the two key concepts in {{euaprov|Option}}s and {{euaprov|Forward Transaction}}s. As for {{euaprov|Allowances to be Delivered}} — okay, there is at least a term for the physical half of that, but it’s rubbish. What about “'''{{euaprov|Delivery Amount}}'''”?  
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 “'''{{euaprov|Purchase Amount}}'''” for {{euaprov|Forward Transaction}}s, or a “'''{{euaprov|Strike  Amount}}'''” for {{euaprov|Option Transaction}}s (or a “'''{{euaprov|Transaction Amount}}'''”, for both) might have been nice, given they are the key concepts in {{euaprov|Option Transaction}}s and {{euaprov|Forward Transaction}}s.  
 
As for {{euaprov|Allowances to be Delivered}} — okay, there is at least a term for the physical half of that, but it’s rubbish. What about “'''{{euaprov|Delivery Amount}}'''”?
 
(To be fair to the Emissions ninjas at IETA, they ''do'' have this concept: “{{ietaprov|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.
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.


'''{{euaprov|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 [[De minimis threshold test|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.
'''{{euaprov|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 [[De minimis threshold test|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.
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