Platts is a leading global provider of energy, petrochemical and metals information and a premier source of benchmark price assessments for those markets. Platts has long advocated greater information transparency in oil and other energy commodity markets and has pioneered highly innovative methods of price discovery in such markets.
In today's era of heightened public interest in price reporting organizations, Platts has been the object of extensive regulatory and media attention. Platts' aim is to build awareness among various stakeholders of its role in the commodity markets, its price assessment processes and how they protect against distortion of its price assessments. Here you will find facts about Platts as well as Platts' responses to several regulatory consultations and media reports.
IOSCO acknowledges that Platts has embraced the Oil PRA Principles
On September 17, 2015 the International Organization of Securities Commissions (IOSCO) announced that the price reporting agencies (PRAs) have made the IOSCO Oil PRA Principles an "integral part" of their price assessment practices and that IOSCO saw no need to continue its annual review of the Principles’ implementation.
IOSCO said: "Given the progress that has been evidenced to date, the commitment by the four main PRAs to continue adhering to the PRA Principles, and to undergo independent external assurance reviews, IOSCO, the IEA, IEF and OPEC do not believe that further annual implementation reviews will be necessary at this time". The full report can be found by clicking this link.
Platts remains committed to ensuring its price assessment processes continue to fully align with ISOCO’s PRA Principles across all commodities and will continue to retain an independent accountancy firm to conduct voluntary reasonable assurance reviews of its alignment to the PRA Principles.
In 2013, Platts was the first PRA to align with the Oil PRA Principles and voluntarily undergo a reasonable assurance review. Additionally, in 2014 Platts was the first PRA to voluntarily extend the Principles to its price assessment processes in the power and gas, agriculture, metals and petrochemicals sectors.
IOSCO Principles for Oil Price Reporting Agencies
As part of its commitment to transparency and integrity, Platts has engaged Ernst & Young (EY) to conduct annual independent assurance reviews of its alignment with the IOSCO Principles for Oil Price Reporting Agencies (PRA Principles).
The PRA Principles, which set standards for governance and control systems, were introduced by the International Organization of Securities Commissions (IOSCO) and endorsed by the G20 in October 2012.
In its 2013 and 2014 reviews, EY confirmed that Platts' strong governance structure and operational processes were aligned with IOSCO's PRA Principles in all material respects with regard to its oil benchmarks.
EY’s 2013 and 2014 reviews were reasonable assurance reviews - the highest standard for this type of review and the standard supported by IOSCO in its Sept. 9 initial report on the implementation of the PRA Principles.
For 2014, the reasonable assurance review included a comprehensive review of Platts' documentation of its processes for price assessments used for oil and also tested the operating effectiveness of these processes in Houston, London and Singapore for the twelve-month period from 1 October 2013 to 30 September 2014.
In 2013, Platts announced it would voluntarily apply the IOSCO PRA Principles to its non-oil commodities of power, petrochemicals, metals and agriculture and similarly, conduct annual independent assurance reviews of its alignment to the Principles.
In 2014, like in oil, Platts engaged Ernst & Young (EY) to conduct an annual independent assurance review of its non-oil alignment to the Principles. The review was completed in February 2015 and, included a comprehensive review of Platts’ documentation of its processes for price assessments used for power, petrochemicals, metals and agriculture in Houston, London and Singapore as at 28th February 2015.
As with oil, the reasonable assurance review for non-oil demonstrated Platts' alignment to the PRA Principles.
Distinctions Between LIBOR and Oil Price Reporting
False parallels are often drawn between oil and energy market price reporting and the generation of the British Bankers Association's London Interbank Offered Rate (LIBOR) indices. There are no similarities.
Rebuttal of June 19, 2013 Wall Street Journal Article
On June 19, 2013, The Wall Street Journal published a front-page article, “Traders Try to Game Platts Oil-Price Benchmarks,” which contained quotes from mostly unnamed traders who claimed that they profited by reporting above or below market prices in Platts’ price assessment process. The article falsely implied that Platts’ price assessment processes had been compromised. Here are Platts' responses:
Platts and Energy Markets
Platts is an independent information and services provider. Our role as an impartial publisher is to observe, analyze and report on the markets. We have no stake in the value of the commodities we cover. Participation in our news gathering and price assessment processes is voluntary, as is the use of our information. Our aim is to protect the integrity of our price assessment processes and to publish information that is useful to our customers and helps the markets operate with greater transparency and efficiency.
The quality of data inputs – not the quantity – is of primary importance in developing a price assessment that represents true market value. To maintain the integrity of our price assessments, we employ structured processes underpinned by rigorous, well-defined guidelines which are publically available at Platts Methodology & Specifications.
Transparency is of paramount importance to price discovery, particularly given the complexity and non-standardized nature of physical oil markets. For Platts, transparency means full disclosure of our methodologies and of the data underlying our price assessments. The transparency of Platts’ Market-On-Close oil price assessment process, including identification by company name of all submitted bids, offers and transactions, is unparalleled.
© 2015 Platts, McGraw Hill Financial. All rights reserved.