An examination of the ACE market in New Zealand: Efficiency and deemed value mitigation

Abstract

Part One – Efficiency of the ACE Market 1. The ACE market appears to meet the standard conditions for efficient markets. 2. Several information sources exist for the New Zealand Annual Catch Entitlements (ACE) market making information easily accessible. 3. Small fishers are reliant on Licensed Fish Receivers (LFRs) for both ACE information and access to ACE, and are concerned that excessive market power exists in the ACE market – small fishers are at a competitive disadvantage. 4. Larger fishers search for ACE information data more frequently than small fishers and rely on commercially supplied information via FishServe and direct fisher contacts. 5. ACE market participants utilise networks, including quota brokers and LFR–fisher relationships in ACE sourcing and trading.

Part Two – Arbitrage in the NZ ACE Market: Deemed Value Mitigation 1. Trade in ACE between overfished fishers for reducing deemed value liability exists in the New Zealand ACE market. 2. Over the seven year period 2005 to 2012 ACE arbitrage trading resulted in savings in deemed value obligations of $1.766 million. 3. The number of fishstocks where arbitrage trading occurs is a small percentage of total fishstocks; in 2012 only seven fishstocks had deemed value savings, through arbitrage, of more than $1000. 4. The general trend in arbitrage trading for 2005 to 2012 is downward – the notable exception being Ling 7