Evidence of package lease trading in a
mature multi-species ITQ market
James Innes, Olivier Thébaud, Ana Norman-López, L. Richard Little, John Kung
10 July – IIFET 2014, Brisbane, Australia
MARINE RESOURCES AND INDUSTRIES/OCEANS AND ATMOSPHERES FLAGSHIP
Outline
• Background
• Theoretical basis
• Implications in practice?
• Case study
• Management system, fishery
• Observed behaviour (Innes et al, 2014, Marine Policy)
• Conclusions
2 | Evidence of package trades in a mature multi-species ITQ market | James Innes
Background
• Theoretical and modelling work suggests it may be beneficial to
trade packages of quota in multi-species markets (e.g. Iftekhar & Tisdell
2012; Tisdell & Iftekhar 2013)
• Benefits greater when: Mature market, complementarity in quota - varying
between participants
• Most likely when: Joint production, economies of scale, transaction costs
• All implying value of a package > sum of its parts
• Practical implications?
• Realistic descriptions of how markets operate
• Credible modelling assumptions
– Typically assume separate single species markets
• Assumptions around potential efficiency gains?
3 | Evidence of package trades in a mature multi-species ITQ market | James Innes
Case study:
The Coral Reef Fin-Fish Fishery (CRFFF) Quota Market
• ITQ system
• Est. 2004, 3 forms of quota traded (CT, RTE, OS)
• Initial allocation primarily based on fishing history
– Grandfathered
• No real constraints on trade (buy, sell, lease)
– Trading somewhat ad hoc
• Retrospective balancing not permitted
• TACs constant (2004-14)
4 | Evidence of package trades in a mature multi-species ITQ market | James Innes
Case study:
The Coral Reef Fin-Fish Fishery (CRFFF)
• Relatively selective (handline)
• Heterogeneity in:
– Species composition by lat
– Targeting by vessel
– $ value is primarily live coral trout (CT)
• Results in heterogeneous demand wrt mix of quota
• Peaked in 2008-09, cyclones (09,11)
5 | Evidence of package trades in a mature multi-species ITQ market | James Innes
Quantities of quota leased
• Packages just under 50% by volume
• Influence of expectations?
• As value increased less CT in packages
1200
1000
00%
00%
00%
00%
00%
00%
00%
00%
00%
Units ('000)
800
600
400
200
0
2004-05
2005-06
2006-07
2007-08
2008-09
6 | Evidence of package trades in a mature multi-species ITQ market | James Innes
2009-10
2010-11
2011-12
CT
RTE
OS
Package
Value of trades
• Weighted by beach price
• CT 97-99% of total package value
30
25
00%
00%
00%
00%
00%
00%
00%
00%
00%
$AUS (million)
20
15
10
5
0
2004-05
2005-06
2006-07
2007-08
2008-09
7 | Evidence of package trades in a mature multi-species ITQ market | James Innes
2009-10
2010-11
2011-12
CT
RTE
OS
Package
CT in package
Intra-annual trends
600
• First month/s
• Predominantly package trades
• 2nd best solution to minimise
transaction costs?
• Reflection of expectations
• Single species
500
Units ('000)
400
• More constant or progressive
• Used to balance holdings
CT
300
RTE
OS
200
100
0
8 | Evidence of package trades in a mature multi-species ITQ market | James Innes
Package
Sequence of trades
CT trades
0.8
0.8
0.7
0.7
0.6
0.6
2004-05
0.5
2005-06
Proportion of quota
Proportion of quota
Package trades
0.5
0.4
0.3
0.2
2006-07
0.4
2007-08
0.3
2008-09
0.2
2009-10
0.1
0.1
0
0
2010-11
2011-12
1
2
3
4
5
1
2
Trade number
• 1st trade 68% in a package only 17% CT
• Distinct behaviours at the traders level?
• ‘packageOnly’ 40-50% , ‘singleOnly’ 10-17%, ‘mix’ 34-48%
9 | Evidence of package trades in a mature multi-species ITQ market | James Innes
3
Trade number
4
5
Conclusions
• Package trading behaviour present in the CRFFF quota market
• Implies 4 (or more) markets for quota (CT, RTE, OS, package)
• 3 trading strategies (at least); single only, package only, mix
• If modelling may wish to account for this behaviour
• First prioritising package trades, then single species
• Further evidence of transaction costs in the CRFFF? (Thébaud et al, 2013;
Innes et al, in Press)
• Questions for the future
• Distinct sub-groups within the traders?
10 | Evidence of package trades in a mature multi-species ITQ market | James Innes
Thank you
Marine Resources and Industries /
Fisheries Assessment, Economics &
MSE
James Innes
E james.innes@csiro.au
w www.csiro.au
ADD BUSINESS UNIT/FLAGSHIP NAME
12 | Evidence of package trades in a mature multi-species ITQ market | James Innes
Numbers of traders
90
80
70
Account holders
60
50
onlyBatch
40
onlySingle
mix
30
20
10
0
2004-2005
2005-2006
2006-2007
2007-2008
Financial year
13 | Evidence of package trades in a mature multi-species ITQ market | James Innes
2008-2009
2009-2010
2010-2011
Numbers of traders vs quota ownership
14 | Evidence of package trades in a mature multi-species ITQ market | James Innes