Platts, rivals ask for exemption from benchmark regulations

* Argus Media and ICIS also request exemption

* IOSCO publishes their letters

* PRAs say commodities differ from rates market

Leading commodity price reporting agencies have called on global regulators to exempt them from new rules aimed at preventing financial benchmark manipulations, arguing that it would reduce liquidity and transparency in markets such as oil.

Oil price reporting agencies came under renewed scrutiny last month after European Commission authorities searched the headquarters of oil majors BP, Shell and Statoil and Platts, part of McGraw Hill Financial Inc, saying they suspected oil prices have been manipulated.

Price reporting agencies (PRAs) such as Platts, Argus Media and ICIS said commodities market were different from the rates market and should therefore be exempted from new regulations, proposed in the aftermath of the Libor rate-rigging scandal.

“International oil markets have different characteristics to interest rate markets. Several provisions in the financial benchmarks principles… are inappropriate to the environments in which we operate,” ICIS said in a letter.

The letters by Argus, Platts and ICIS were published by the International Organisation of Securities Commissions (IOSCO) which sought responses from market participants to its proposed Principles for Financial Benchmarks.

Last year, IOSCO published a separate report on the principles for oil price reporting agencies outlining recommended practices but refraining from regulating PRAs and de facto confirming existing practices.

Platts, Argus and ICIS said in their letters the principles for price reporting agencies agreed with IOSCO were sufficient to oversee their activities and they should not become subjects of regulations under financial benchmarks principles.

“If implemented, those draft principles would damage commodity markets, because such withdrawal of market participants from providing PRAs with market data would reduce transparency in commodity markets, hinder price discovery and undermine the integrity of PRA commodity benchmarks,” Argus said.

It said it was concerned that PRAs would be burdened by additional audits under separate sets of principles and would have to report suspicious submissions, a move it said was incompatible with the voluntary nature of information flow between market participants and PRAs.

“Such requirements would present the strong likelihood of a retreat from participation in benchmark formation,” Platts said.

“In the physical commodities markets, which are frequently illiquid, such a result would result in reduced market transparency and would be detrimental to the effective functioning of such markets,” Platts added.

Argus and ICIS said that before any new principles for financial benchmarks were applied to commodity markets, the impact should be assessed by all market stakeholders, including the International Energy Agency and the Organization of the Petrolem Exporting Countries.

Thomson Reuters, parent of Reuters news, competes with Platts, Argus and ICIS in providing news and information to the oil markets.

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