CaliforniaCarbon.info, May 16, 2016: The fortnight stretching from Monday the 2^nd May through to last Friday the 13^th, proved to be a quiet period for the CCA secondary market. Likely, this was in no small part due to the large number of market participants attending the NACW conference in San Diego at the start of the month. The fortnight’s aggregate traded volume was 4,719,000, just more than a third of the preceding single week’s total. Trading on the front represented 39% of the volume, the year-end date accounted for 32%, whilst the June 2016 and December 2017 periods took 19% and 10% respectively. In terms of vintages, V2016 predictably took the lion’s share; V2019 trades also made a rare but paltry appearance on the exchange. This low volume environment is not expected to continue much longer, primarily due to the occurrence of WCI’s 7^th joint auction this week.

However, if the previous trend of growing volume ended last fortnight, historic patterns in open interest continued to play out. Again there was contract creation at the front of the exchange – 1,815,000 new contracts opened for the prompt and leading months; yet the exchange lost 553,000 contracts from the year-end period. The majority of this loss was from V2015, which does raise questions about entities’ strategies regarding their 2015 30% compliance submissions due in November of this year.

Volatility was once again rife over the fortnight, the market closed down at $12.46 on the front on Friday, the benchmark finished at $12.56. However, a $0.06 fall over the two weeks is by no means a sufficient description, the front has had a range of $0.26 over this period. On the Thursday of the first week, the market climbed to a zenith of $12.72 (benchmark – $12.82) – the first time the market has been in the region of the auction floor since the beginning of March. However, the whole price curve fell on four consecutive days last week at an order of approximately $0.06 a day, reaching its current low by Thursday close. Thus, hopes that the market had risen to near the floor before the auction were quashed, although of course this does still remain a distinct possibility.

Harry Horner – (harry@californiacarbon.info)