RepuTex produces price assessments for the Australian carbon market on a daily basis. In doing so, we adopt a price discovery process and methodology to produce assessments for prices that are consistent and reliable indicators of market value.
In accordance with the International Organization of Securities Commissions (IOSCO) Principles for Price Reporting Agencies (“IOSCO PRA Principles”), our methodology, along with our supporting policies, is documented and publicly available below:
Please note that the below information is a summary of our full Methodology guide. For further detail, please access the full document via the link above.
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Adherence to the IOSCO PRA Principles
Our methodology, policies, procedures, and protocols are aligned with best practice for commodity price assessments under the IOSCO PRA Principles.
The IOSCO PRA Principles were published in October 2012, and were endorsed by the G20 in November 2012, establishing best practice guidelines for governance, control, quality, integrity, and conflict management for entities that report commodity prices.
Contribution of data to RepuTex – Our Survey Panel process
In developing markets such as the Australian carbon market, more representative, reliable pricing must be achieved by providing greater levels of transparency. This includes capturing a growing amount of market data from transactions that occur beyond the brokered market which, on average, represents just 30-40 per cent of traded volumes in the Australian over-the-counter (OTC) market.
To support the provision of information from market participants, we operate a “Survey Panel” process. The Survey Panel is made up of market data submitters who may directly report information to members of the RepuTex price assessment team.
Only active participants with a verifiable track record as a buyer or seller are approved by RepuTex to participate in the Survey Panel to directly submit input market data. We accept market data by email, phone, messenger, and face-to-face meetings.
Our price assessment team collects input market data from sell-side and buy-side participants, along with intermediaries. This information is considered in addition to market data and heard activity from brokers and electronic trading platforms, enabling our assessors to consider the widest universe of information across the OTC market.
Market data relevant to assessments
RepuTex utilises various types of market data in compiling its assessments, including:
- Confirmed transactions
- Executable bids and offers
- Other market information, such as spread differentials, correlations, and other values described below.
We encourage market participants to submit all market data that may be relevant to our price assessments, enabling full consideration of information.
Data hierarchy and application
In accordance with the IOSCO PRA Principles, we use the following hierarchy to measure the strength of market data submitted, and to determine fair market value.
Transaction information is the preferred source of market data. However, depending on the liquidity of the market – and the timing of activity – other information may be used, such as executable bids and offers. This can be in combination with transactions, or can substitute transactions, depending on liquidity.
For example, while in most markets there is a relatively higher rank given to confirmed transactions over bids and offers, in illiquid markets, value can be a function of time.
Depending on the time of day a transaction occurs, the most current competitive bids and offers may better represent market value. In this case, bids and offers may supersede transaction data when forming the assessment for the day. The transparency of provided information is also important. For example, transparent bids, offers and trades may be given greater priority than non-transparent market information.
On days bids and offers are used to form the assessment, we assess market value based on the most competitive bid and offer available. This may involve the use of a mid-point or establishing a new tradeable level where bids (offers) are presented above (below) the last assessment.
Consideration of other information
In the absence of sufficient transaction data, bids and offers, RepuTex assessors may use other factors to determine market value, including, for example, trigger prices, and the relative values of similar products.
In certain assessments, market value may be determined based on comparative metrics to related markets. For example, tight price correlations exist between certain carbon credit products and the premiums and discounts between these products. When no bid, offer or transaction data exists, our assessors may consider spread differentials to more actively traded products with slightly different specifications.
In very opaque markets, price developments may at times not be immediately apparent. For some assessments, particularly where liquidity is low, RepuTex price assessors may reflect a price change in the next reporting period. This is in line with RepuTex’s principle of acting on new information as it becomes available. Where there are not enough eligible data points, RepuTex may roll forward the previous price assessment.
Assessment guidance and definition of pricing method
RepuTex daily assessments are published alongside guidance of how that day’s assessment was developed, including a description of the basis upon which the assessments are produced, by calculation or derived values, aligned to a description of the formula employed.
Published assessments are categorised as the following:
Type A: Prices are evaluated based on market data and heard activity reported to RepuTex via its Survey Panel process including confirmed transactions and executable bids and offers. Transaction information is the preferred source of market data. However, depending on the liquidity of the market being assessed, and the timing of activity, executable bids and offers that are open to the market as a whole can be used in combination with transactions, or can substitute transactions.
Type B: Prices are evaluated based on analyst judgement of other information, including, for example, comparative metrics to related markets, such as spread differentials to more actively traded products with slightly different specifications.
Where relevant, RepuTex includes a concise explanation of the pricing rationale describing how judgement has been used to determine the assessment. This is published in our market update reports and is generally relevant to more illiquid carbon credit products.
Other information is also published including the size and liquidity of the market being assessed, accounting for market data that is provided under confidentiality, and the range of prices and volumes across different traded products.
Consideration of volume in assessment
Volume is taken into consideration in our assessment process. For instance, transactions with bigger volume carry more weight than smaller volume transactions.
In markets with low liquidity, consideration of the volume of transactions is an important input into the assessment of market value. This ensures that larger trades, which have a more significant market impact, are given more weight.
Additionally, the consideration of volume helps to mitigate price manipulation. In markets where trading volumes are low, prices may be more easily manipulated, for example via smaller trades at higher prices, often occurring at the end of financial reporting periods. By accounting for volume, a “volume-weighted average price” (VWAP) assessment reduces the influence of such trades, ensuring a more representative price reference.
We calculate the volume weighted average price by multiplying the price of each trade by its volume, to produce a trade value, which is summed across the applicable time window, and divided by the total volume of trades within that same time window.
Timing and specifications
Our daily spot market assessments reflect the most competitively priced ACCUs issued within each assessment category. Each assessment is measured in AUD/Tonne of carbon dioxide equivalent (/tCO2e), with a minimum volume of 1,000/t CO2e.
Each ACCU assessment is calculated as a volume-weighted average price with larger trades, which have a more significant market impact, given more weight. All published prices are rounded to the nearest $0.05/t.
The reporting period for inclusion for our daily assessments is a 24-hour period ending 19:30 Melbourne/Sydney/Canberra time, validated and published by 11:00 Melbourne/Sydney/Canberra the following business day. Assessments are published each business day, excluding observed Australian national public holidays.
Contact our assessment team, or become a data submitter under our Survey Panel process
If you have any questions on our pricing methodology, or you are interested in becoming a member of RepuTex’s Survey Panel process, please contact us via reporting@reputex.com
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International offset price discovery process
RepuTex publishes daily assessments for global voluntary carbon markets in collaboration with third party sources as attributed.
International offset market process reflect full-day physical assessments based on the average of traded values transactions recorded over a trading day. Given global voluntary carbon markets trade across multiple time zones, data collection and price assessments for a given day reflects all regional operations for the business day. Information is published in line with third party policy and timing conventions. All prices are reported in US Dollars/tonne. For further definitions please refer to this page and links to relevant third party vendors.
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Disclaimer
This Disclaimer is in addition to our Terms and Conditions and shall not supersede or otherwise affect these Terms and Conditions. Prices and other information contained in this publication have been obtained by us from various sources believed to be reliable. This information has not been independently verified by us. Those prices and price indices that are evaluated or calculated by us represent an approximate evaluation of current levels based upon dealings (if any) that may have been disclosed prior to publication to us. Such prices are collated through regular contact with producers, traders, dealers, brokers, and purchasers although not all market segments may be contacted prior to the evaluation, calculation, or publication of any specific price or index. Actual transaction prices will reflect quantities, qualities, credit terms, and other parameters. The prices are in no sense comparable to the quoted prices of commodities in which a formal futures market exists.
Evaluations or calculations of prices by us are based upon certain market assumptions and evaluation methodologies, and may not conform to prices or information available from third parties. There may be errors or defects in such assumptions or methodologies that cause resultant evaluations to be inappropriate for use. Your use or reliance on any prices or other information published by us is at your sole risk.
Neither we nor any of our providers of information make any representations or warranties, express or implied as to the accuracy, completeness or reliability of any advice, opinion, statement or other information forming any part of the published information or its fitness or suitability for a particular purpose or use. Neither we, nor any of our officers, employees or representatives shall be liable to any person for any losses or damages incurred, suffered or arising as a result of use or reliance on the prices or other information contained in this publication, howsoever arising, including but not limited to any direct, indirect, consequential, punitive, incidental, special or similar damage, losses or expenses.
We are not an investment adviser, a financial adviser or a securities broker. The information published has been prepared solely for informational and educational purposes and is not intended for trading purposes or to address your particular requirements. The information provided is not an offer to buy or sell or a solicitation of an offer to buy or sell any security, commodity, financial product, instrument or other investment or to participate in any particular trading strategy. Such information is intended to be available for your general information and is not intended to be relied upon by users in making (or refraining from making) any specific investment or other decisions. Your investment actions should be solely based upon your own decisions and research and appropriate independent advice should be obtained from a suitably qualified independent adviser before any such decision is made.
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If you have any questions or comments on this document please contact our price assessment team via reporting@reputex.com. If you have any questions regarding data licensing please contact our Client Services team.
Kind Regards,
The RepuTex Team
Australian Energy Markets
