Energy price-reporting organizations including Platts said they ordered independent reviews of their methods after calls by regulators last year to safeguard against market manipulation.
Platts, the unit of McGraw Hill Financial Inc. (MHFI) that was raided last week as part of a European Union probe into oil pricing, said its review will start in June and be completed this year. Argus Media Ltd. and Reed Business Infomation’s ICIS said their evaluations would be completed by October. The process, which preceded and is separate from the EU inquiry, will examine whether the agencies comply with their own stated price-assessment methods, the companies said this week.
The appraisals are a response to calls by international regulators for “robust” controls to prevent manipulation and distortion of wholesale prices for commodities from crude oil to gasoline. Auditors will assess whether the companies have adhered to principles set out last October by the International Organization of Securities Commissions, a Madrid-based group that brings together regulators from more than 100 countries.
“A review by an external auditor as called for by the IOSCO principles will demonstrate to regulators the strength of Platts’s internal controls,” Dan Tanz, the company’s vice president of editorial, said yesterday in an e-mailed statement from London. Platts has a long track record of “strong internal governance,” he said.
EU investigators last week raided the offices of Platts as well as oil companies Royal Dutch Shell Plc (RDSA), BP Plc (BP/), Statoil ASA (STL) and Argos Energies as part of a probe into potential price manipulation in crude, refined products and biofuels markets.
David Nicholas, a London-based spokesman for BP, declined to comment on BP crude trades and Morten Eek, a spokesman for Statoil, said the Norwegian company doesn’t comment on specific trades. Shell Chief Financial Officer Simon Henry said on May 21 that Platts provides transparency to a complex market.
Traders including Glencore Xstrata Plc (GLEN), Vitol Group and Gunvor Group Ltd. were asked to give information to the EU, though they aren’t being investigated, according to three people familiar with the situation, who asked not to be identified because the matter is private. The Swiss-based companies declined to comment.
The European investigation marks the third time global pricing benchmarks have drawn regulatory 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.
“This is nothing like Libor,” Adrian Binks, Argus’s chairman and chief executive in London, said in an e-mail May 20. “Price reporting agencies are independent companies that compete with each other. It’s really industry’s choice to use our quotations. We’re not receiving money for the trades. We’re not like the banks.”
Argus hasn’t been visited by the EU or been asked questions as part of the oil probe. ICIS hasn’t been approached by the EU, the company said in a statement today.
“We’ve agreed to go through this external audit on a voluntary basis to demonstrate that we’re following the best practices as set out by IOSCO,” Richard Street, ICIS’s head of regulation and compliance, said by phone yesterday from London.
Platts, Argus and ICIS publish benchmark prices for various commodities including crude, refined oil products, chemicals and natural gas.
Bloomberg LP, the parent of Bloomberg News, competes with Platts and other companies in providing energy-markets news and information.
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