This analysis has originally been published for ICIS EU carbon subscribers on 19 Feb 2019 at 16:36 CET.
The Leipzig-based energy exchange EEX decided to provide an additional reporting of open interest numbers for EUA trading on 19 February 2019. Following the statement by EEX to also provide net synthetic open interest data in addition to the “gross” numbers, the new overall open interest for all liquid contracts is much lower compared to the prevailing methodology. Open interest is used as a proxy to get an idea over the net demand for EUA contracts, data that provides market participants with an idea f the tightness of the market when put in context to overall supply.
Different to “gross” open interest data accounting for short and long EUA positions, the synthetic net OI considers proprietary trading accounts in net terms, while agent accounts will continue to be reported in “gross” numbers also with the new methodology.
Positions of market makers are netted with both calculation methodologies.
Main points and analysis
- In a press statement released on 19 February, the EEX announced to publish a synthetic net Open Interest report in addition to the open interest figures already available
- This comes after market participants have questioned the current EEX Open Interest reporting in form of a “gross” methodology in which the numbers reported by EEX were higher than the netted positions
- Given that the calculation of a net open interest is difficult, the EEX states that the newly provided “synthetic spread” is intended for information purposes only and does not necessarily reflect the factual open interest
- The accounting of positions in the clearing system remains unchanged: Gross proprietary account OI + net market maker account OI + gross agent account OI
- The new synthetic open interest calculation
is as follows: Net proprietary account OI + net
market maker account OI + gross agent account
- Positions of proprietary accounts will be netted with the new synthetic open interest calculation methodology
- Positions in agent position accounts continue being published in gross terms, e.g. long and short positions can exist at the same time and will not be netted automatically.
- Positions of the market maker positions will be netted
- The net synthetic open interest shows that the delta between the reported open interest and the net synthetic open interest is significant and varies largely percentage-wise for the different contracts
|Open Interest (contracts)||Net synthetic open interest (contracts)||Delta (contracts)||Delta (percent)|
Marcus Ferdinand is Head of European Carbon & Power Analytics at ICIS. He can be reached at Marcus.Ferdinand@icis.com
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