The “Prohibited List” includes EUAs designated in previous circulars as ‘Affected EUAs’. But the Exchange makes the reservation that the inclusion of the Affected EUAs on the “Prohibited List” does not affect the validity of any previous transaction in Affected EUAs.


In the light of the foregoing it follows that the trader had so far no legal means to object to the delivery by the Exchange and the Clearing House of Affected EUAs. It nevertheless means that after such a transaction the buyer has a big problem with these EUAs because now, according to the Exchange Circulars the opposite rule will be binding on the participants: no Clearing Member are allowed to transfer any EUA, CER or ERU on the Prohibited List (‘Prohibited Instrument’) to the Clearing House. The transfer of any Prohibited Instrument to the Clearing House (or of any instrument which becomes a Prohibited Instrument prior to the Clearing House’s transfer of that instrument to a buyer) shall not discharge a Clearing Member’s obligation to make delivery of an EUA, CER or ERU.


Clearing Members shall be also obliged to transfer an additional EUA, CER or ERU, as applicable, which is not a Prohibited Instrument, to the Clearing House: (i) if they deliver a Prohibited Instrument to the Clearing House; or (ii) if an EUA, CER or ERU was not a Prohibited Instrument at the time of transfer to the Clearing House but becomes a Prohibited Instrument prior to its transfer by the Clearing House to a buyer.


For each such Prohibited Instrument, the Clearing Member in question must deliver within the original delivery timetable one acceptable EUA, CER or ERU (as applicable) that is not and does not become a Prohibited Instrument. A Clearing Member will be treated as having made a failed delivery if it fails to do this within the required timeframe. This obligation applies even if the Clearing House has made on-delivery of the Prohibited Instrument in question to another Clearing Member.


The obligation imposed on the Clearing Member to deliver within the original delivery timetable EUAs, CERs or ERUs that are not and do not become a Prohibited Instrument raises questions whether such a performance is in principle possible in a current general situation. As was recalled at the beginning, the issue whether to publicly disclose the serial numbers of stolen allowances is now only analysed by the relevant authorities.


How to deal with the Affected (Prohibited) EUAs which are bought in good faith for value, in reliance on the seller’s obligation to deliver EUAs with good title, still remains a problem first a foremost to the simple buyers and sellers in emissions market.