(1) Reasons for Proposal
Before a market maker re-contract (December 2020), this Partial Amendment aims to amend the Notice to supplement the assessment method based on the progress in operations so far and expand market makers.
Reflect amendments in the Act on the Allocation and Trading of Greenhouse-Gas Emission Permits (June 1, 2020) and the Enforcement Rule there of (August 18, 2020).
(2) Major Provisions
A. Prepare the market maker designation procedure during the implementation year (Article 3 paragraphs 1, 3, and 4)
(Current) Specify that market makers are designated to coincide with the beginning of the implementation year, which makes it impossible to urgently designate market makers during the implementation year.
* While there is a conditional clause for designation during the implementation year, it is based on the initial designation date (June 2019), which is no longer needed..
(Amendment) Change the conditional clause for initial market maker designation to “in the event that a market maker is designated during the implementation year.”
(Effect) Allow securities firms to participate as market makers during the 1st implementation year in the 3rd planning period.
B. Improve market maker designation standards (attached Table 1)
(Current) Not possible to recruit new firms except for existing market makers as a certain period of emission permits trading is required in market maker designation standards.
* No financial firm has a history of emission permits trading other than existing market makers including Korea Development Bank and Industrial Bank of Korea.
(Improvement) Delete transaction history (1 year) in market maker designation standards.
(Effect) Allow financial firms to file for market maker designation.
C. Improve market making assessment standards (attached Table 2)
(Current) Provide no buffer when the price crashes as the current assessment standards* encourage making transactions instead of submitting the bid/ask price and assume a continuous supply of reserves.
* With regard to assessment standards for bid/ask price submission (3,000 tons per day, ≤ 1,000 won in spread, ≥ 20 minutes), the maximum score is given regardless of the bid/ask price as long as a transaction is made (≥ 1,500 tons).
(Improvement) Strengthen bid/ask price obligations* and apply them as routine assessment standards, but newly insert assessment standards for a fluctuating market.**
* Giving a perfect score is changed to 10 additional points in case of bid–ask spread decrease (1,000 won/ton → 500 won/ton), bid–ask price retention time increase (≥ 20 min → ≥ 30 min), and ≥ 1,500 tons of transactions made.
** The price decreasing period and the price increasing price are separated, assessment consists of the proportion of transactions (15 points), the quantity contributed (50 points), and the number of days contributed (25 points), and it is conducted based on the level of contributions to alleviating market price fluctuations.
(Effect) Contribute to boosting the emission permits market by alleviating price fluctuations.
D. Other revisions
Revise paragraph/subparagraph numbers as a provision about emission permits market maker designation, obligations, and management is newly inserted in the Act and the Enforcement Decree.
- Revise paragraph/subparagraph numbers for cited provisions in the Act and the Enforcement Decree (Article 1 and Article 3 paragraph 1).
- Revise a provision that cites market makers’ obligations to present the bid/ask price, which are defined in the Enforcement Decree, to define the obligations (Article 2 subparagraph 1).
Reflect a revision of the provision about Korea Exchange from Article 26 of the Enforcement Decree to Article 34 (Article 2 subparagraph 1).
