| Originating department: | Commercial Services |
| Company Circular No: | LCH.Clearnet Ltd Circular No 2264 |
| Service Circular No: | LCH EnClear No 202 |
| Date: | 25 February 2008 |
| To: | All LCH EnClear Clearing Members |
Introduction of OTC Clearing Services for CER and EUA Emission Contracts
LCH.Clearnet is pleased to announce the launch of its OTC clearing service for CER and EUA emission contracts. These contracts are an extension of the existing LCH.Clearnet Enclear Energy Services.
The launch date will be Friday 29 February 2008.
The CER and EUA contracts will be cleared using the ECS system.
The margin rates for these contracts can be found on the following section of the LCH.Clearnet website http://www.lchclearnet.com/margin_rates.asp.
OTC CER Forward Contract
| Description | Physically settled forward contract for the delivery of Certified Emissions Reductions issued pursuant to Article 12 of the Kyoto Protocol that may be used for determining compliance with emissions limitation commitments in accordance with the EU Emissions Trading Scheme. |
| Lot Size | One lot is equal to 1000 Certified Emission Reductions units. A unit being the right to emit 1 tonne of CO2 equivalent. |
| Minimum Contract Size | One lot |
| Currency | Euros (€) |
| Minimum Tick Size | One Euro cent per tonne, €0.01/tonne |
| Settlement Price | LEBA CER closing price or such other price as may be prescribed by the Clearing House from time to time. |
| Trading Day | ECS will be open for trade registration between 07:30 and 17:00 |
| Contract Series | A total of 5 December contract months on an annual cycle commencing on December 2008 and ending December 2012. |
| Expiry Day | Contracts will expire at 17:00 on the first business day of the contract month (December) |
| Delivery | Delivery is fulfilled by the transfer of CERs from the Holding Account of the Seller to the Holding Account of LCH.Clearnet Ltd and from there to the Holding Account of the Buyer. |
OTC EUA Forward Contract
| Description | Physically settled forward contract for the delivery of EU Allowances issued in accordance with the terms of Directive 1003/87/EC of the European Parliament and amending Council Directive 96/61EC. |
| Lot Size | One lot is equal to 1000 EU Allowance units. A unit being the right to emit 1 tonne of CO2 equivalent. |
| Minimum Contract Size | One lot |
| Currency | Euros (€) |
| Minimum Tick Size | One Euro cent per tonne, €0.01/tonne |
| Settlement Price | LEBA EUA closing price or such other price as may be prescribed by the Clearing House from time to time. |
| Trading Day | ECS will be open for trade registration between 07:30 and 17:00 |
| Contract Series | A total of 5 December contract months on an annual cycle commencing on December 2008 and ending December 2012. |
| Expiry Day | Contracts will expire at 17:00 on the first business day of the contract month (December). |
| Delivery | Delivery is fulfilled by the transfer of EU Allowances from the Holding Account of the Seller to the Holding Account of LCH.Clearnet Ltd and from there to the Holding Account of the Buyer. |
Expiry Schedule
| OTC Forward CER and EUA Contract Expiry Dates | |
| Contract Series | Expiry Date |
| Dec08 | 01/12/2008 |
| Dec09 | 01/12/2009 |
| Dec10 | 01/12/2010 |
| Dec11 | 01/12/2011 |
| Dec12 | 03/12/2012 |
Fees
LCH.Clearnet will collect clearing fees from Clearing Members, and these will be included in month end fee invoices. Delivery fees will not be charged for these contracts.
| Contract | Clearing Fee Per Lot |
| CER Forward Contract | €1.50 |
| EUA Forward Contract | €1.50 |
ECS Contract Codes
| Contract | Contract Code |
| CER Forward Contract | CER |
| EUA Forward Contract | EUA |
Clearing Member Participation
Clearing of OTC CER and EUA contracts is open to any LCH EnClear Clearing Member approved by the Clearing House to clear trades originating from an Approved Emissions Broker. Those clearing members who are currently not so approved and who wish to participate in clearing should contact the LCH.Clearnet Ltd Membership department.
Contact: Membership@lchclearnet.com or +44 (0)20 7426 7891/7627
Miscellaneous
Questions relating to the topics covered in this circular should be directed to the following:
| General | Isabella Kurek-Smith | +44 (0)207 426 7460 |
| General | Jason LaBrooy | +44 (0)207 426 6323 |
| Membership and Training | Dee Kalsi | +44 (0)207 426 7891 |
| Risk | Matthew Wade | +44 (0)207 426 7659 |
| Operational | Kevin Watts | +44 (0)207 426 7699 |
Yours sincerely,
Isabella Kurek-Smith
Head of Energy and Freight Markets
Commercial Services