NYMEX Holdings, Inc. (NYSE: NMX), the parent company of the New York Mercantile Exchange, Inc. (NYMEX), the world’s largest physical commodity futures and options exchange, has announced a new exchange.
The Green Exchange(TM) is a collaboration with Evolution Markets Inc., Morgan Stanley Capital Group Inc., Credit Suisse, JPMorgan, Merrill Lynch, Tudor Investment Corp., ICAP and Constellation Energy. According to a release, it will offer a range of environmental futures, options and swap contracts for markets focused on solutions to climate change, renewable energy, and other environmental challenges.
NYMEX says Green Exchange products are expected to begin trading during the Q108 and will be cleared by NYMEX. The Green Exchange venture is expected to launch as a U.S. Commodity Futures Trading Commission (CFTC)-regulated exchange during the Q109, pending regulatory approval.
NYMEX Chairman Richard Schaeffer said, "The broad slate of new environmental products will perfectly complement NYMEX’s energy complex, enabling The Green Exchange customers to efficiently manage the cost of reducing their ‘carbon footprint.’ The Green Exchange expects to focus on both global and regional compliance trading while also building liquidity and demand for the highest quality voluntary standards in the market. Underlying all this will be the ability for all market participants to manage risk and take positions in environmental derivatives markets."
Initially, The Green Exchange intends to offer trading in global carbon-based contracts, such as carbon allowances (EUAs) under the European Union Emissions Trading Scheme, carbon credits (CERs) under the U.N. Clean Development Mechanism, and verified greenhouse gas emission reductions (VERs/VCUs) used in accordance with voluntary carbon standards. The Green Exchange will also offer contracts for U.S. SO2 and NOx emissions allowance trading programs, as well as contracts for national Green-e(TM) certified voluntary renewable energy certificates (RECs).
Evolution Markets President and CEO Andrew Ertel said, "Leveraging financial markets is an essential part of addressing environmental challenges such as global warming, and The Green Exchange is the right financial marketplace at the right time. We’ve identified a set of contracts that address climate change, encourage renewable energy development, and tackle air quality. The Green Exchange will be more than a financial marketplace. It will be an engine behind global efforts to improve the environment."
NYMEX, Evolution Markets, and their partners have worked with utilities, investment banks, environmental brokers, environmental groups, and institutional asset managers to establish a set of contracts that enable market participants to effectively manage risk and gain direct exposure to the global carbon market and other U.S. environmental markets.
The group says it has also consulted with environmental groups to select the highest quality voluntary carbon and renewable energy offset standards as the basis for products.
According to NYMEX, the Green Exchange venture is in discussions with additional strategic partners from a broad cross section of market participants including banks, brokers, hedge funds, and energy and industrial corporations.
Products will be listed for trading on the CME Globex(R) electronic trading platform and for clearing on the NYMEX ClearPort(R) platform. All contracts will be cleared through the NYMEX clearinghouse as regulated futures contracts. In order to ensure broad global market participation, The Green Exchange will have:
— Established links with NYMEX clearing and trading platforms to provide market participants the opportunity to cross-hedge risk and cross-margin positions between established energy and emerging environmental markets;
— Opportunities for all market users to earn equity in the Green Exchange venture by helping to create liquid and transparent markets in its products; and
— Highly competitive transaction fees.
In keeping with its mission to assist in protecting the environment through market-based approaches, The Green Exchange venture intends to offset all of its electricity use with Green-e(TM) certified renewable energy credits, and intends to offset its remaining non-power related carbon emissions through the purchase of voluntary carbon credits, making the exchange fully carbon neutral.
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