High-volume contracts such as North Sea Dated Brent are well-supplied with data from traders. Other markets rely on reporters calling companies to gauge price levels, and depend on their sources being honest when they report their views. For commodities that are not traded or reported every day, price assessors can take into account information such as feedstock costs to determine the price at which trades could take place theoretically.
“Market participants are under no legal or regulatory obligation to report their deals to price reporting agencies or any other body,” Fattouh said in the report. “Whether participants decide to share information depends on their willingness, their reporting policies and their interest in doing so.”
Platts said in March it would introduce a quality premium for Ekofisk and Oseberg crudes, two of the four crude grades that make up the Dated Brent marker used to price more than half the world’s oil. The changes, which started on May 1, were designed boost trading liquidity and to take into account their superior quality over the other two grades, Forties and Brent, that make up Dated Brent, Platts said at the time. That came after Shell made adjustments to its trading contract.
The European investigation marks the third time global pricing benchmarks have drawn the regulators’ scrutiny in the past year following investigations into bank manipulation of the London interbank offered rate, or Libor, and ISDAFix, the benchmark for the $379 trillion swaps market.
The International Organization of Security Commissions concluded in October that price assessments could be vulnerable to manipulation because traders participate voluntarily, meaning they may selectively submit only trades that benefit their positions. Total said in a submission to the forum of global regulators that the published oil price is wrong “several times a year.”
Argus and ICIS joined Platts in publishing a self- regulatory code in April 2012 in response to Iosco’s findings.
Statoil is taking the investigation “very seriously” and cooperating to the best of its ability, Chief Executive Officer Helge Lund said today in an interview in Harstad, Norway.
Lund said he’s been given “very limited” information about which products and markets are being investigated, adding that it’s “important to underline that this is a suspicion, not a conclusion.”
In April 2012, Optiver Holding BV and three employees agreed to pay $14 million to settle market-manipulation allegations by U.S. regulators. The Dutch proprietary-trading firm used a high-frequency trading program called the “Hammer” in 2007 to affect the settlement prices of crude, heating oil and gasoline traded on Nymex. As part of the settlement, Optiver didn’t admit or deny wrongdoing.
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