Deemed value arbitrage in the New Zealand annual catch entitlement market |
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| Institution: | 1. Department of Accounting and Finance, Unitec Institute of Technology, Private Bag 92025, Mt Albert, Auckland, New Zealand;2. Department of Civil Engineering, Unitec Institute of Technology, Private Bag 92025, Mt Albert, Auckland, New Zealand;1. College of Resources and Environmental Science, Hubei Key Laboratory of Catalysis and Materials Science, South-Central University for Nationalities, Wuhan, PR China;2. Key Laboratory of Plant Germplasm Enhancement and Specialty Agriculture, Wuhan Botanical Garden, The Chinese Academy of Science, Wuhan, PR China;3. Shenzhen Key Laboratory of Environmental Chemistry and Ecological Remediation, College of Chemistry and Environmental Engineering, Shenzhen University, Shenzhen, PR China;4. Department of Applied Ecology, Faculty of Environmental Sciences, Czech University of Life Sciences Prague, Czech Republic;5. School of Water Resources & Environment, China University of Geosciences Beijing, Beijing, PR China;1. Department of Biology, San Diego State University, San Diego, CA 92182, United States;2. Bureau of Land Management, Hollister Field Office, Hollister, CA 95023, United States;1. State Key Laboratory of Solidification Processing, Northwestern Polytechnical University, Xi’an 710072, China;2. Key Laboratory of Radiation Detection Materials and Devices, Ministry of Industry and Information Technology, School of Materials Science and Engineering, Northwestern Polytechnical University, Xi’an, Shaanxi 710072, China;3. Sorbonne Universités, UPMC Univ Paris 06, Laboratoire de Chimie Physique Matière et Rayonnement, 4 place Jussieu, F-75252 Paris cedex 05, France |
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| Abstract: | New Zealand's Quota Management System (QMS) consists of a two tier operational structure: Quota shares in a fishstock provide an Annual Catch Entitlement (ACE) of the total allowable commercial catch (TACC) of the specific fishstock. Fishers operating in a multispecies fishery need a portfolio of ACE that matches the mix of their annual catch. Fishers may own quota shares, and thereby receive the needed ACE allocations or they may operate without quota shares and rely on acquiring ACE in the ACE market. Whatever the fisher's situation, it is common for fishers to both buy and sell ACE during a fishing year as they seek to balance their actual catch against ACE. The incentive to achieve a balance is strong because at year-end fishers whose catch exceeds ACE are required to pay a fee called ‘deemed value’. For many fishstocks the deemed value fee increases sharply as the percentage by which a fisher's catch exceeds their ACE increases. When no ‘unbalanced’ ACE is available for purchase, an overfished fisher may attempt to mitigate their deemed value liability by engaging in arbitrage trading in ACE whereby they buy ACE from other overfished fishers. This study examines the nature and extent of ACE arbitrage behaviour in the New Zealand quota managed fishery. The study finds that the number of fishstocks where arbitrage trading occurs is relatively small and is declining. However, sizeable deemed value mitigation transactions are still evident. |
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| Keywords: | Deemed value Annual catch entitlement Catch balancing Arbitrage |
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