Reuters: Regulatory News: UPDATE 1-Oil pricing agencies propose self-regulatory code

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UPDATE 1-Oil pricing agencies propose self-regulatory code Apr 30th 2012, 15:47 Mon Apr 30, 2012 11:47am EDT * PRAs seek comment on price reporting code * PRAs face prospect of more regulatory oversight LONDON, April 30 (Reuters) - Oil price reporting agencies Platts, Argus and ICIS have launched a draft price reporting code to avoid conflicts of interest and ensure transparency, moving to head off increased scrutiny proposed by international regulators. The proposal comes as the International Organisation of Securities Comissions (IOSCO) decides whether to increase oversight of the agencies, whose prices are used for the world's biggest traded commodity. Price assessments for over-the-counter oil trade and derivatives produced by industry reporters are used to settle billions of dollars worth of physical oil deals and to help settle trade on benchmark futures exchanges. The draft independent price reporting organisations, or IPRO, code "provides for robust monitoring and compliance", the companies said on Monday. They believe the code will keep regulators at bay. "This is a serious piece of work that really codifies what we've put in place over the years," said Adrian Binks, Chairman and Chief Executive of privately held Argus Media. "Many of our customers are telling us they do not want to see us regulated - they are vehemently opposed to it. And it's essential that we be seen as completely neutral in the work that we do." IOSCO, whose members regulate more than 95 percent of the world's securities markets, said last month that price reporting agencies (PRAs) might be regulated in an attempt to prevent market manipulation and increase transparency. It asked for responses by March 30. A top industry consultant said earlier this month that Platts, which is owned by McGraw-Hill, has too much power in the physical oil markets. In a 16-page response, Liz Bossley, chief executive of Consilience Energy Advisory Group, said PRAs set high standards and by and large uphold them, but problems lie in the scope - rather than the quality - of their work. But Platts President Larry Neal argues that market rivalry acts as a sufficient check to any one company's dominance. "There's a lot of competition among PRAs and there are plenty of examples of where customers have switched," he said. "And the competition is really important to keep the firms on their toes." IOSCO is looking at the role of price reporting agencies (PRAs) following a request last year by the Group of 20 (G20) top economies, under pressure to curb speculation blamed for rapid increases in oil prices. Journalists at reporting agencies assess prices by calling up as many traders as possible and contacting them via instant messaging to ask where they see the market, trying to avoid pitfalls such as reflecting only a buyer's or seller's view. That process has evolved over time and Platts and Argus publish methodologies detailing how they assess prices. But those steps have not satisfied some market participants who say it is still easy to influence reporters' price discovery. "Trying to police this market is a thankless and very difficult task," said a physical oil products trader. "It's a problem the governments have let happen. There's been a lack of investment in regulation." Veteran oil market commentator, Phil Verleger, has praised Platts and Argus price reports for their high quality and argued against the need for regulation of PRAs. "Quite simply, IOSCO seeks to cure a nonexistent problem," Verleger wrote in an eight-page response to IOSCO. The three companies are seeking comments from the industry on their draft code. Neal said the IPRO code has been sent to IOSCO for its feedback. Link this Share this Digg this Email Reprints

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