The Market Microstructure of the European Climate Exchange

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractThis paper analyzes the market microstructure of the European Climate Exchange, the largest EU ETS trading venue. The ECX captures 2=3 of the screen traded market in EUA and more than 90% in CER. 2009 Trading volumes total e22 billion and are growing, with EUA transactions doubling, and CER volume up 61%. Spreads range from e0:02 to e0:06 for EUA and from e0:07 to e0:18 for CER. Market impact estimates imply that an average trade will move the EUA market by 1:08 euro centimes and the CER market 4:29. Both Granger-Gonzalo and Hasbrouck information shares imply that approximately 90% of price discovery is taking place in the ECX futures market. We …nd imbalances in the order book help predict returns for up to three days. A simple trading strategy that enters the market long or short when the order imbalance is strong is pro…table even after accounting for spreads and market impact.

Liquidity and market efficiency in the world's largest carbon market

“…The former concludes that the ECX leads price discovery and the latter concludes that futures leads price discovery. Mizrach and Otsubo (2011) also investigate the initiation of price discovery between the Bluenext spot market in Paris and the ECX futures market in London using Hasbrouck (1995) and Gonzalo and Granger (1995) information share estimation approaches. They report that the ECX is responsible for about a 90% share of combined price discovery for the two platforms.…”

“…An examination of connections between liquidity and market efficiency on a platform such as the ECX, with actively traded instruments, should therefore be centred on intraday trading. The carbon futures order imbalance analysis of Mizrach and Otsubo (2011) using daily measures therefore will unlikely suffice. Since they focus on daily order imbalance, the results have no relevance for our research questions.…”

Statistical regularities of Carbon emission trading market: Evidence from European Union allowances

“…The market size of EUA is much bigger than CER, with the trading volume of EUA being about 10 times of CER (see Ref. [10]). Therefore, in this paper we analyze the daily records (the most actively traded contract) of the EUA database from the European Climate Exchange (ECX), which is the leading venue market relevant.…”

Modeling the relationship between European carbon permits and certified emission reductions

“…In contrast, Chevallier (2010c) …nds EUA and CER prices are cointegrated (although with a deterministic trend in the cointegrating relationship). Mizrach and Otsubo (2013) is another recent paper using both EUA and CER data. Its focus, being on market microstructure issues, is di¤erent than ours.…”