An increasing number of companies will be obliged to submit emission allowances in the future. More companies will participate in trading for the purpose of covering and securing their need for emission allowances. However, certain arrangements of such transactions can trigger a license requirement of the involved entity. Under certain circumstances, the application for a banking license for trading in emission allowances may be required.
The German Supervisory Authority has clarified the scope of the license requirements in a recent guidance notice. By doing so, it aligned its orientation in this matter with the given legal status in Europe.
Therefore, OTC-trades of emission allowances which have to be physically settled do not trigger a licence requirement for the involved parties. However, planned trading activities regarding emission allowances and similar instruments like certified emission reductions (CER) have to be examined carefully. If the trading concerns not only spot contracts, a bank license may be required.
It is likely that in the near future also the stipulation of spot contracts will be subject to licensing requirements. New rules regarding the trading of emission allowances are currently discussed in the European Union and will probably be included in the revised Market in Financial Instruments Directive (MiFID II). The draft of the revised directive is expected to be published in autumn 2011.