Monday, September 23, 2002
NASD and the Chicago Climate Exchange® Reach Historic Agreement
Monday, September 23, 2002 - Creation of a market for reducing and trading greenhouse gas emissions in the U.S. has moved one step closer to reality as the Chicago Climate Exchange® (CCX®) selected NASD as the provider of regulatory services for the exchange.
According to the terms of the historic agreement announced today, NASD will assist in the development of registration, market oversight and compliance procedures for members of the CCX as well as auditing of emissions baselines, annual true-up and offset verification and certification procedures. NASD will also help in translating the recent agreement on the architecture of the CCX - a document named The Chicago Accord - into the exchange's rulebook. Additionally, NASD will utilize its state of the art market surveillance technologies to monitor CCX trading activity for fraud and manipulation.
Although no regulatory framework is needed for the operation of the CCX, the decision was made to seek the services of NASD for the independent verification with the belief that it will help provide transparency, liquidity and the highest degree of market integrity to the pilot program.
NASD is the leading private-sector provider of financial regulatory services. NASD touches virtually every aspect of the securities business - from registering and educating all industry participants, to examining securities firms, enforcing both NASD rules and the federal securities laws, and administering the largest dispute resolution forum for investors and member firms. NASD has a staff of 2,000 and offices in 23 U.S. cities, including Chicago. NASD currently regulates under contract The NASDAQ Stock Market, the International Securities Exchange and the NASDAQ Liffe Markets (NQLX), a joint venture between NASDAQ and the London International Financial Futures and Options Exchange to create a marketplace for the trading of security futures products.
The CCX will administer a voluntary pilot greenhouse gas emission reduction and trading program for emission sources, carbon sinks, offset projects and liquidity providers in the U.S. starting in early 2003. Offset providers in Brazil can participate from the outset. Emission sources and offset providers in Canada and Mexico will be integrated into the market during 2003.
The CCX design phase participants, representing companies in the power generation, forest products, manufacturing, oil and gas and agricultural industries, have reached agreement on the architecture of a greenhouse gas trading program involving multiple industrial sectors, emission sources and carbon sinks. This agreement has been summarized in the Chicago Accord.
"The comprehensive nature of this voluntary pilot program makes it unique among the existing cap-and-trade programs," said internationally known financial innovator and Chairman of the CCX Dr. Richard Sandor. "The private sector should be commended on this unprecedented effort to reach agreement across multiple industries. These companies really believe that a proactive approach to climate change advances everyone's long-term interests. It's simply good business."
The CCX market architecture also incorporated input from technical experts representing eighteen design phase participants in the engineering, forestry, agricultural, academic, NGO and public sectors. In total, more than fifty corporate entities and hundreds of experts have contributed to the design phase.
A high-level Advisory Board consisting of academic, business, environmental and public sector leaders was formed with the objective of gathering strategic input. Its members include former U.S. Senators and Governors, the Deans of two leading U.S. business schools, a world-renowned conservation biologist, heads of major financial exchanges and the former Under-Secretary General of the United Nations. Chicago Mayor Richard M. Daley is the Honorary Chairman of the CCX.
There have been years of discussion about the potential for trading carbon emissions, but the CCX will offer the first test of the concept on a scale with global potential. A representative carbon trading market can yield lessons that may be relevant for economies worldwide for years to come.
"Well-functioning markets need transparency," said Dr. Sandor. "As the world's leading provider of regulatory services, NASD will enable the CCX to set the highest standards for market integrity in greenhouse gas emissions trading."
"We are excited to have the opportunity to bring NASD's regulatory expertise to the CCX market, especially at this important formative stage," said Mary Schapiro, NASD's president of Regulatory Policy and Oversight. "CCX is a market with a commendable purpose, and its investors will be best served by a well-regulated, transparent market."
NASD's Chairman and CEO Robert Glauber said, "This gives NASD another opportunity to apply our unparalleled regulatory expertise and systems. The relationship with CCX promotes NASD's goal of becoming the regulatory services provider of choice to financial markets, exchanges and regulators."