Pricing
The broker's daily participation in the marketplace allowed it to provide Southern with the current range of bids to purchase and offers to sell in the over-the-counter emissions allowance market. However, Southern's transaction on behalf of Mississippi Power was structured to be a forward settlement, and in the existing emissions market, there are few standing bids and offers for specific forward settlement structures. In this case, the broker was able to assist Southern in determining an appropriate bid price by taking a look at the up-to-the-minute spot market for allowances and calculating the market carry cost for the seller. With a target price in hand, Southern set its bid price somewhat lower, leaving room for negotiation in the marketplace.

Placing the Bid
With the opening bid price in hand, the broker turned to the market, contacting active sellers that were offering allowances in the over-the-counter market. The broker gauged the sellers interest in structuring a forward settlement deal, and one came back with an offer, albeit higher than Southern's initial bid. A market had been created, and the broker immediately communicated the offer to Southern.

Negotiating Price
Southern had the option of buying at the offer price, or, as is typical, revising its bid and presenting a counter. The broker worked closely with Southern to advise the utility on what bids were achievable in the market. With a counter in hand, Southern returned to the market with a slightly higher bid, but one that came in below the initial offer. The broker then continued to communicate offers and bids until they found an offer in the marketplace that both Southern and its counterparty were willing to accept.

Consummating the Deal
Once an agreed to trading price was established, Southern and its counterparty verbally confirmed the deal over the phone. The broker read the commercial terms of the deal over the phone and asked both parties if there were any further questions. With no further issues to address, the broker then asked both parties if they agreed to the terms. Both sides agreed, at which point the broker introduced them to each other—the first time either became aware of the other's identity.

Contracting
At this point, the broker stepped away from the transaction, leaving Southern and its counterparty to complete the contracting phase directly. SO₂ trading has become a straightforward process with standard contracting documentation. Southern then signed the contracts and reported the trade to the EPA's Allowance Tracking System. With the transaction complete, the allowances are set to be delivered into Southern's account for Mississippi Power in 2000.

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