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Secondary Market Digest

© CaliforniaCarbon.info [email protected] 1

CaliforniaCarbon.info Cap-and-Trade Secondary Market Digest Oct 9th 2018

PRICE PANEL

Spot$15.27($0.07)

These reflect monthly price changes (Aug 31st – Sept 28th ). Visit http://californiacarbon.info/cca/ for the latest pricing info.

OTC V18 Front$15.30($0.08)

OTC V18 Dec 18$15.43($0.01)

Brokers

ICE Front*$15.28($0.11)

ICE V18 Dec 18$15.50($0.03)

ICE V18 Oct 18$15.33($0.06)

ExchangeICE V18 Dec 20$16.99($0.01)

Other publications

ANALYST CONTACT

Abhilasha Fullonton ([email protected])

Phone: +1 (415) 349 5777 (US)

Premium Bulletin (last published Oct 8th)

Offset Digest (last published Oct 1st)

Offset Scorecard (last published Sep 14th)

After-Auction Review(last published Sep 3rd)

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Membership Tier

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Publications $1,050 ü

Data Smart $4,500 ü

Pricing &Forecasts

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Contents

Front Matter 1

Prices Overview 2

Forward Curves 3

Vintage Comparison 4

ICE Volume & OI Breakdown 5

OTC – ICE Comparison 6

Funding Rates & Offset Discounts 7

Back Matter 8

* The front switched from Sept to Oct on 26th Sept

Contents

Front Matter 1

Key Summary 2

Prices Overview 3

Forward Curves 4

Vintage Comparison 5

ICE Volume & OI Breakdown 6

OTC – ICE Comparison 7

Funding Rates & Offset Discounts 8

Back Matter 9

ICE V18 Dec 19$16.28($0.08)

ICE V20 Dec 18$15.46($0.03)

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Monthly Review


KEY SUMMARY


Monthly ReviewCCA front (V18 Sep18), Spot price, V18 Oct18 (Advance) and OTC Dec18 all saw similar movement throughout the month. At the beginning all deliveries were quiet stable seeing a gradual increase from 3rd Sept onwards and coming back down mid-month. Spot price and front price mirrored each other the most as they experience sudden increase towards the end of the month. Front price peaked at USD 15.47 on the 28th Sept while Spot price and OTC Dec 18 plateaued at the beginning of the month.

Volume & OIIn September trades totalled up to 51.8 million tons. Trades decreased and increased in line with price movements. As prices started increasing trades decreased and vice versa. The penultimate week, the cap and trade market saw the highest trades at 35.5 million tons. Entities are evidently rolling their trades to latter deliveries, most from Compliance Period 2 to Compliance Period 3 as entities begin to prepare for CP 3’s first surrender at the end of 2019. A total of 5.4 million OI contracts closed over the last month with V2018 seeing 9.4 million closed contracts. Both V2019 and V2020 saw significant increase in OI over the month withan additional 3.8 million and 4.7 million contracts respectively.

CCO & ICEVibration analysis suggests both CCA and OTC benchmark prices varied throughout the month. Bid and ask differentials have continued to decrease especially for benchmark and broker spot as they converged at USD 0.06 mark. While V19 Dec19 saw a 15 cent difference between bid and ask price. The discount factor for golden CCOs down to 6.50% in September which is a 0.78% decrease over a month. CCO-8 also a dip in the discount factor. It currently stands at 8.68% (in September) from 10.05% in August which is an 1.37% dip over a month. Quite predictably continuing with this years lowering discount factors, it continued to trend below 20% threshold for CCO-8s.



SECONDARY MARKET DIGEST

CCA V2018 Prices, Sept 2018Visit http://californiacarbon.info/cca/ for the latest pricing information

CCA V2020 Prices, Sept 2018PRICES OVERVIEW

V18 CCA ICE Front Brokers' Spot OTC

FrontOTCDec18

ICEDec18

ICE Dec19

ICEDec20

Monthly ∆ 0.13 0.06 0.08 0.01 0.03 0.09 0.066-Month ∆ 0.53 0.72 0.53 0.34 0.47 0.70 0.79

Monthly Range 0.15 0.14 0.12 0.08 0.11 0.11 0.17

6-Month Range 0.62 0.78 0.64 0.48 0.61 0.81 0.99

Largest Daily ∆ (Sept18)

0.05 0.04 0.05 0.02 0.03 0.06 0.06

27-Sep 9-Sep 26-Sep 4-Sep 4-Sep 4-Sep 4-Sep

Largest Daily ∆ (last 6 months)

0.08 0.07 0.09 0.04 0.07 0.07 0.07

16-May 29-Aug 15-Jun 18-May 18-Jun 18-Jun 18-Jun

Average absolute daily ∆ (Sept18) 0.018 0.016 0.016 0.008 0.015 0.016 0.022

Average absolute daily ∆ (last 6

months)0.016 0.016 0.021 0.013 0.016 0.016 0.018

V20 CCA ICE Front

ICEDec18

ICE Dec19

ICEDec20

Monthly ∆ 0.11 0.01 0.07 0.186-Month ∆ 0.53 0.47 0.70 0.93

Monthly Range 0.14 0.10 0.09 0.226-Month Range 0.62 0.60 0.80 1.05

Largest Daily ∆ ( Sept18)0.05 0.03 0.04 0.06

27-Sep 6-Sep 25-Sep 14-Sep

Largest Daily ∆ (last 6 months)

0.08 0.07 0.08 0.08

16-May 23-May 23-May 18-Jun

Average absolute daily ∆ (Sept18) 0.016 0.014 0.016 0.018

Average absolute daily ∆ (last 6 months) 0.016 0.016 0.016 0.019


15.20

15.25

15.30

15.35

15.40

15.45

15.50

15.55

31-A

ug

2-Sep

4-Sep

6-Sep

8-Sep

10-S

ep12

-Sep

14-S

ep16

-Sep

18-S

ep20

-Sep

22-S

ep24

-Sep

26-S

ep28

-Sep

Pric

e ($

)

ICE Front Spot Advance OTC Dec 18

15.0015.2515.5015.7516.0016.2516.5016.7517.0017.25

31-Aug

2-Sep4-Sep

6-Sep8-Sep

10-Sep

12-Sep

14-Sep

16-Sep

18-Sep

20-Sep

22-Sep

24-Sep

26-Sep

28-Sep

Pric

e ($

)

ICE Front ICE Dec 18





ICE V2017Visit http://californiacarbon.info/cca/ for the latest pricing information

ICE V2018FORWARD CURVES

ICE V2019 ICE V2020


14.50

15.00

15.50

16.00

16.50

17.00

17.50

18.00

18.50

Dec 18 Dec 19 Dec 20 Dec 21

Price

s (in

$)

Delivery Month 31-Jul-18 31-Aug-18 28-Sep-18

14.50

15.00

15.50

16.00

16.50

17.00

17.50

18.00

18.50

19.00

Dec 18 Dec 19 Dec 20 Jul 21 Dec 21

Price

s (in

$)


14.50

15.00

15.50

16.00

16.50

17.00

17.50

18.00

18.50

Dec 18 Mar 19 Jun 19 Sep 19 Dec 19 Dec 20 Dec 21

Price

s (in

$)


14.50

15.00

15.50

16.00

16.50

17.00

17.50

18.00

18.50

Dec 18 Mar 19 Jun 19 Sep 19 Dec 19 Dec 20 Dec 21

Price

s (in

$)





SECONDARY MARKET DIGESTVisit http://californiacarbon.info/cca/ for the latest pricing information

VERTICAL SPREADSICE V17/V18 ICE V19/V18


ICE V20/V18

*Vertical spreads are calculated by comparing secondary market price of selected deliveriesfrom V2017, V2019 and V2020 against current vintage i.e. V2018. The x-axis shows thecalendar month and the y-axis shows differentials. The graph consist of a value that is simplyextracted by subtracting front price of one vintage against the front price of another. e.g.V2019 Dec 18 price – V18 Dec 18 gives us price differentials between V2019 and V2018.

**Prices for all deliveries taken at the end of the calendar month.

-0.02

-0.02

-0.01

-0.01

0.00

0.01

0.01

0.02

0.02

Jun-18 Jul-18 Aug-18 Sep-18Diffe

rent

ial

Front Dec 18 Dec 19 Dec 20 Dec 21-0.03

-0.02

-0.01

0.00

0.01

0.02

Jun-18 Jul-18 Aug-18 Sep-18

Diffe

rent

ial

Front Dec 18 Dec 19 Dec 20 Dec 21

-0.02

-0.02

-0.01

-0.01

0.00

0.01

0.01

0.02

0.02

Jun-18 Jul-18 Aug-18 Sep-18

Diffe

rent

ial

Front Dec 18 Dec 19 Dec 20 Dec 21




SECONDARY MARKET DIGESTVisit http://californiacarbon.info/cca/ for the latest pricing information

ICE BREAKDOWNICE traded volume, by delivery lead times

Open interest by vintage (Aug & Sept)* Open interest by delivery (Aug & Sept)* * OI on 09/20/18


0 10000 20000 30000 40000 50000 60000 70000

SeptemberOctober

NovemberDecember

JanuaryFebruary

MarchAprilMay

JuneJuly

AugustSeptember Prompt

+1M+2M+3M+4M+5M+6M+7M+8M+9M+10M+11M+1Y+2Y+3Y

0

10

20

30

40

50

60

70

80

Augu

st

Sept

embe

r

Augu

st

Sept

embe

r

Augu

st

Sept

embe

r

Augu

st

Sept

embe

r

Augu

st

Sept

embe

r

Augu

st

Sept

embe

r

V2015 V2016 V2017 V2018 V2019 V2020

Open

Inte

rest

('00

0's)

Dec-20

Sep 19

Dec 19

Dec 18

Oct 18

Sep 180

10

20

30

40

50

Augu

st

Sept

embe

r

Augu

st

Sept

embe

r

Augu

st

Sept

embe

r

Augu

st

Sept

embe

r

Augu

st

Sept

embe

r

Augu

st

Sept

embe

r

Sep 18 Oct 18 Dec 18 Sep 19 Dec 19 Dec 20

Open

Inte

rest

('000

's)

V2020

V2019

V2018

V2017

V2016

V2015




SECONDARY MARKET DIGESTVisit http://californiacarbon.info/cca/ for the latest pricing informationOTC COMPARISONAverage daily bid-ask differentials, by instrument

Average daily ICE-OTC differentials**

**Calculated as average daily ICE closing minus average daily OTC bid-ask mean. A positive answer means OTCmedians were lower than ICE settles, and a negative answer means ICE settles were lower than OTC medians.

Vibration analysis***

***The primary axis tracks the average daily price change in absolute terms (i.e. logs value of all movements up anddown, even if value is retraced subsequently). The secondary axis expresses the relationship, for each trading month,between the sum total of the daily changes and the monthly gain/loss in absolute terms. The higher the ‘vibrationfactor’, the larger the amount of fluctuation within the month relative to the overall trend. However, positioning themonthly change as the denominator means the output is sensitive to the precise timing of price reactions. This chartmakes use of benchmark CCA values (V2017 Dec 17).


0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

20.00

$0.00

$0.05

$0.10

$0.15

$0.20

$0.25

Sep-17Oct-1

7Nov-17

Dec-17Jan-18

Feb-18

Mar-18

Apr-18

May-18

Jun-18Jul-18

Aug-18Sep-18

Vibr

ation

Fac

tor

Aver

age A

bsolu

te Da

ily P

rice C

hang

e

OTC Vibration Fa ctor ICE Vibra tio n Factor OTC Av. Absolute Daily ∆ ICE Av. Absolute Daily ∆

$0.00

$0.02

$0.04

$0.06

$0.08

$0.10

$0.12

$0.14

$0.16

Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18Brokers ' Spot Benchmark V19 Dec 19

-0 .08-0 .06-0 .04-0 .020.000.020.040.060.080.100.12

Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18

Front ICE-Broker Spot Benchmark - Broker Benchmark





ICE V2018Visit http://californiacarbon.info/cca/ for the latest pricing information

ICE V2020IMPLIED FUNDING RATES

OFFSET DISCOUNTSBenchmark ICE CCA-Golden CCO Benchmark ICE CCA-CCO-8


Delivery V18 Price on Sep 28

Sep 28 Annual Rate

Monthly Av. Annual Rate

3-Month Av. Annual Rate

6-month Av. Annual Rate Total Return

Front 15.47 NA NA NA NA NA

Dec 18 15.55 3.14% 4.14% 4.05% 4.00% 3.14%

Dec 19 16.38 5.34% 5.25% 4.79% 4.43% 3.49%

Dec 20 17.07 4.77% 4.92% 4.54% 4.24% 3.76%

Delivery V20 Price on Sep 28

Sep 28 Annual Rate

Monthly Av. Annual Rate

3-Month Av. Annual Rate

6-month Av. Annual Rate

Total Return

Front 15.43 NA NA NA NA NA

Dec 18 15.51 3.15% 4.17% 4.02% 3.80% 3.15%

Dec 19 16.34 5.54% 5.28% 4.93% 4.08% 3.50%

Dec 20 17.17 5.22% 5.13% 4.63% 3.97% 4.09%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

$1.60

$1.80

Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18

Discou nt Value Discou nt Percentage

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18Discou nt Value Discou nt Percentage



DISCLAIMERWhile Climate Connect, its data or content providers, the financial exchanges and each of their affiliates and business partners display information on the web site ingood faith, no representation or warranty is given or shall be deemed given or implied by Climate Connect, its data or content providers, the financial exchanges andeach of their affiliates and business partners to you or any other person as to the completeness, accuracy, sufficiency, currency, reliability or suitability of any suchinformation, all which information is provided on an ‘as is’ basis, and all such representations warranties or conditions that may be implied by statute, general law orotherwise (whether as to title, non-infringement, merchantability, fitness for purpose or otherwise) are hereby excluded. Access full disclaimer statement

METHODOLOGY

The calculation of CCA OTC Bilateral and CCA Spot prices is conducted using a non-weighted average of broker price marks collected by Climate Connect. The averageis computed by dividing the summation of individual data values by the number of data sources. Access full methodology statement

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ABOUT CALIFORNIACARBON.INFO

CaliforniaCarbon.info is a news and data portal for the California cap and trade market. It is operated by Climate Connect Ltd, an online media firm established inLondon in 2010. With headquarters in London and in New Delhi, Climate Connect’s dedicated editorial, research, forecasting, and IT solutions desks have a globalreach that allows them to serve clients in four continents. Climate Connect’s distinguished board of advisors consists of high net-worth individuals in the Bay Area andin New Hampshire, who boast 40 years of cumulative experience in climate change markets. For more information, please visit http://www.climate-connect.co.uk/

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