??(BN) ECX’s CO2-Option-Price Errors ‘Dangerous,’ Tullett

is it just me that thinks it weird that bad prices ``stand''...but (see below the following story)... C02 Option Settlements for Sept. 9 'Will Stand,' ICE Memo Says

By Mike Anderson
Sept. 10 (Bloomberg) -- Sept. 9 options settlements for
some European Union and Union Nations carbon contracts were
miscalculated "as a result of a technical error," the
Intercontinental Exchange Inc. said today in a memo.
"The settlement prices published have been used for
overnight margining and will therefore stand," according to a
circular signed by company Secretary Patrick Davis and sent to
members today. "The exchange apologizes to members and
customers for the inconvenience caused."

Link to Company Statment
https://www.theice.com/publicdocs/circulars/10059.pdf but then the ice publishes ``indicative prices''?? (that would be actually correct)?? comments my way Attachment 1: https://www.theice.com/publicdocs/circulars/10059%20attach

Attachment 2: https://www.theice.com/publicdocs/circulars/10059%20attach

Mathew Carr, emissions markets, energy reporter. London Bloomberg News ph +44 207 073 3531 yahoo ID carr_mathew


ECX's CO2-Option-Price Errors 'Dangerous,' Tullett Broker Says
2010-09-10 10:37:18.657 GMT

By Mathew Carr
Sept. 10 (Bloomberg) -- Settlement errors on carbon-option
prices at the European Climate Exchange were "quite
dangerous," according to a broker at Tullett Prebon Plc.
The exchange owned by Intercontinental Exchange Inc.
blamed a "technical error" after it published faulty prices
yesterday for carbon-allowance options. It will be publishing
revised figures "shortly," Elaine Bailey, London-based
spokeswoman for ICE, said today in a phone interview.
ECX published call-option prices yesterday for EU carbon
permits with a strike price of 100 euros ($127) that were more
expensive than equivalent options to buy at 35 euros. Traders
must set aside cash called margins based on how far "out of the
money" their trades are relative to settlement prices.
"I understand that ICE has been working on their
settlements, but it's quite dangerous to go live with a new
extrapolator without checking the results," said Richard
Wilson, a broker at London-based Tullett. "If this had happened
over month end, it could have catastrophic results for companies
with external clearing/margining," he said today in an e-mail.
A call option for the December 2012 carbon future carrying
a strike price of 100 euros jumped yesterday to a settlement
of 81 euro cents ($1.27) a metric ton from 1 cent a day earlier,
according to the ECX data.
The option-settlement price should have been about 5 cents
to 18 cents, Wilson said.
A call option gives the right to purchase a security at a
set price. The underlying price of the December 2012 future was
16.30 euros a ton yesterday. A call with a strike of 35 euros,
much closer to the market price, was less expensive, at 68
cents, according to yesterday's ECX data.

For Related News and Information:
Top Power Stories: PTOP <GO>
Emissions-trading stories: NI ENVMARKET BN <GO>
Today's top energy news: ETOP <GO>
European power-markets home page: EPWR <GO>

--Editors: Mike Anderson, John Buckley.

To contact the reporter on this story:
Mathew Carr in London at +44-20-7073-3531 or

To contact the editor responsible for this story:
Stephen Voss on +44-20-7073-3520 or sev@bloomberg.net

-0- Sep/10/2010 10:37 GMT