ASX's renewable energy certificate (REC) Futures are standardised and centrally cleared forward contracts for delivery of large-scale generation certificates (LGC’s) via the REC registry (Register of large-scale generation certificates) operated by the Clean Energy Regulator (CER).
Eligible RECs for delivery include large-scale generation certificates (LGC’s) as defined in the Renewable Energy (Electricity) Act 2000 (Cth) and generated from non-wood waste sources.
For further information see the ASX REC futures product guide.
Benefits of trading ASX REC futures
Key benefits of ASX REC futures contracts include:
- a transparent forward price curve that can be referenced for investment, trading and risk management purposes
- the potential for margin offsets against other ASX energy futures contracts
- flexible trading mechanisms that enable market participants to bi-laterally arrange transactions off-market (5,000 RECs or greater)
- the effective mitigation of counterparty credit exposure through a well established futures clearing house
- hedge cover for new entrants
- new opportunities for financial market participants to provide risk management services
- seamless integration with existing financial institutions and brokers that already service the broader global energy and environmental markets
- ease of access to cross-commodity (electricity, natural gas and other energy-environmental products) hedging and trading strategies through existing ASX exchange and clearing house infrastructure.
ASX REC futures have:
- a contract size of 1,000 renewable energy certificates;
- are deliverable via the CER register of large-scale generation certificates (as per the ASX 24 Operating Rules and Determinations);
- a minimum block trade threshold of 5,000 RECs;
- contracts listed up to five years ahead;
- AUD currency denomination; and
- the potential for margin offsets against other ASX energy futures contracts.
How is the market used?
Participants use the REC futures market to:
- hedge their particular market exposure or financing risk;
- mitigate counterparty credit exposure within their existing portfolio;
- speculate on the price direction or price correlation of a commodity/commodities;
- implement sophisticated cross-commodity trading and hedging strategies; and
- gain exposure to a new asset class.
ASX REC futures are not suitable for all traders and investors. Before trading ASX REC futures, you should carefully assess your experience, investment objectives, financial resources and other relevant considerations and consult your licensed financial services adviser. In particular, you should understand the implications of leverage, delivery, additional margin calls and unlimited losses on your investments.