Forward contracts suspended on Environment Exchange

The Exchange, which is a trading floor for PRNs, is run by the international OM Group, and moved from OM premises in London to the company's Scottish building earlier this autumn. But, due to regulatory complications the Exchange has been forced to temporarily suspend its PRN Forward contracts even though the end of 2001 could be its busiest period ever. In London the forward contracts were regulated by the Financial Services Authority with the aid of an OM regulatory officer who covered the company's London operations only.

Managing director Angus Macpherson said: “We are confident that we will be introducing the forward contract again shortly as a commodity contract which would no longer require us to be regulated by the FSA.”

The key to getting the forward contract up and running again is to switch it from being seen as an investment contract to a commodities contract. Mr Macpherson added: “We see our work far more as commodity trading – PRNs are bought as evidence of compliance not as investments.”

Meanwhile, Mr Macpherson said that the marketplace for PRNs now is as what has been predicted with gradually increasing prices. “We saw an average price in April of 13 per PRN and in October this reached 27.25.”

6,000 tonnes traded today
Despite the increase in PRN prices and a likely rush to obtain the evidence in the final quarter of the year, activity on the Exchange has been only fractionally ahead of last year at 58,288 PRNs being trade. But, during today Mr Macpherson said that trade was over 6,000 tonnes. He continued: “If the price is right the volume will be there. The challenge is to get people to bid at the right prices. We have had PRNs available since the beginning of the year. Anybody who has said that they have unable to comply and have not attempted to buy through the Environment Exchange cannot be said to have made reasonable efforts.”

Mr Macpherson added: “Over 100 accredited exporters and reprocessors have signed up to the Exchange and between them that have more than one million tonnes of capacity.”