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Active trading revives OI creation

March 27, 2017 by Billy Hamshaw

The trading of CCAs ramped up last week after a docile previous week. The CCA front opened at USD 13.58, USD 0.03 below the previous week’s close of USD 13.61. The current front CCA contract remained at a discount to the auction reserve price for the remaining part of the week and settled at USD 13.56, a slim USD 0.01 below the reserve price and USD 0.05 down from the previous week’s close.

With over 5,636,000 tons traded in total, the past week marks the most liquid week of trading this month. This week’s traded volume was approximately six times higher than the previous week and twice above the 4-week moving average of 2,760,000. Trading remained concentrated mainly around the current vintage-V2017, with a share of 94.85% of the total volume traded, besides a couple of transactions which accumulated 150,000 and 140,000 worth of contracts for V2016 and V2019 respectively.

In terms of delivery, the contracts were spread between the current front, upcoming front (April) and current benchmark (December 2017) delivery with a 36%, 35% and 27% share of total volume traded.  The heavy trading observed on the upcoming front delivery is likely a result of traders beginning to roll March positions into the April contact. The week passed without a single transaction further down the forward curve.

The open interest creation improved considerably compared to the previous week, with a net change of 2,633,000 contracts. 1,009,000, 1,500,000 and 124,000 new contracts were created for current front-March 2017, upcoming front-April 2017 and current benchmark-December 2017 delivery respectively.

The upcoming front-April 2017 delivery, opened at USD 13.60, declining further to USD 13.57 and settling at USD 13.58, USD 0.04 below the previous week’s close of USD 13.62. However, the December benchmark registered a minor gain of USD 0.01, settling at USD 13.76 compared to the previous week’s close of USD 13.75. A rise of USD 0.01 consistently was observed along the remainder of the forward curve.

North of the border, Ontario’s cap-and-trade market witnessed another transaction last week as the state held its first auction. Market participants now await the auction results due to be announced on 4th April. Unchanged from the previous week’s close, Ontario Carbon Allowances (OCAs) closed at CAD 18.41, a premium of USD 0.01 above the current vintage equivalent in California based on the RBC daily exchange rate.

Chandan Kumar (chandan@californiacarbon.info)

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