Platts Says Commodity-Price Transparency at Risk From RegulationIsaac Arnsdorf
Increased regulation of methods used to establish commodities prices could backfire by reducing transparency as market participants may stop giving information, according to Platts, a price publisher.
“Commodity-price discovery depends on the voluntary participation of traders, producers and other market players,” the unit of McGraw Hill Financial Inc. said in an e-mailed response to questions. “Regulation could have the inadvertent consequence of inhibiting participation in the price-assessment process which would, in turn, decrease transparency, thus having the opposite effect of regulators’ intentions.”
European antitrust authorities raided Platts’ offices, along with those of Statoil ASA, BP Plc and Royal Dutch Shell Plc, in May as part of an investigation into alleged manipulation of oil prices. Regulatory probes are expanding after banks rigged the London interbank offered rate, a benchmark for $300 trillion of global interest-rate contracts.
Platts publishes prices for commodities from oil to metals. Two companies are no longer taking part in its assessments for metals, Joe Innace, editorial director for metals in New York, said yesterday.
The International Organization of Securities Commissions, a Madrid-based group representing regulators from more than 100 countries, set tougher guidelines July 17 for publishing benchmarks for everything from raw materials to equities. One goal is that prices should be based on “observable” deals.
For crude oil and refined fuels, Platts publishes the names of companies buying and selling, the products they are dealing, prices, delivery ports and other transaction information. Those details aren’t revealed for other commodities, Platts said.
“The degree of data transparency may differ, but rigorous verification techniques combined with the application of clear and transparent methodologies will readily yield assessments that reflect true market value,” Platts said in the statement.
Bloomberg LP, the parent of Bloomberg News, competes with companies including Platts in providing commodity prices and news.