Some companies do not co-operate with price reporters
Platts, a relatively small cog in New York-listed McGraw-Hill Financial, proudly calls itself an organisation of journalists. Yet Platts has more importance to the giant energy companies, trading houses and investment banks that trade oil than any other media organisation.
Platts reporters monitor bids and offers for products from the blends that make up Dated Brent - the international crude benchmark - to jet fuel. Each day they publish prices or "assessments" that are used by traders to price oil deals worldwide.
A Platts assessment underpins the Brent futures market, used by airlines to protect against price moves and by hedge funds to speculate; the British government uses Platts assessments to calculate taxes on oil producers; and ultimately Platts' prices play a part in the cost of petrol at the pump.
"You need to have a dialogue with Jorge. If you don't, he could keep you out [of the oil market] forever," says an executive at a large Swiss-based commodity trading house.
Platts executives, who responded on his behalf, acknowledge Mr Montepeque's outsize profile but play down his actual power: "No one would deny that Jorge is a big personality in the oil market but decisions do not rest with one person," says Dan Tanz, head of editorial.
Prices in the oil market are notoriously difficult to track. Trade is fragmented into hundreds of different blends of crude oil and regional markets for refined products, such as petrol and diesel.
Individual reporters at companies such as Platts are responsible for assessing many thinly traded markets at the same time. Traders can choose which transactions to report and, with billions of dollars at stake, there is a strong incentive to fix prices.
"The game of having a leveraged position in the futures market and then trying to change the Platts price by a few cents is as old as the market itself," says one trader.
Some companies do not co-operate with price reporters at all. If no transactions take place in a market on a given day reporters have to estimate prices based on quotes, introducing a subjectivity to the process that is unpopular with regulators after Libor.
Mr Montepeque is credited with bringing order to a market that had previously relied even more on judgment. He designed what is known as the "Platts window" in Singapore in the 1990s, before introducing it to the European and US markets.
As global director for market reporting in London, Mr Montepeque continues to oversee and fine tune the methodology and, with colleagues, reviews applications from traders wishing to submit prices.
In the window - a tightly controlled 30-minute period at the end of the day - authorised companies electronically submit bids and offers to Platts reporters. If those bids are met, a company has to trade. Platts is free to publish all data.
"Let's be clear - the window is more rigorous, more transparent and more accurate than what went before," says one veteran trader, who is otherwise critical of Mr Montepeque.
But Mr Montepeque's system is now at the centre of a European Commission competition probe. Pannonia Ethanol, a Hungarian company, has complained that it was denied access to the window for ethanol trading, and at least two of the raids focused on ethanol market records, according to people familiar with the situation.
Platts declines to say why Pannonia was refused entry to the window but says the application process is clear-cut and clearly communicated to candidates. Companies already active in the window would have been consulted on whether Pannonia had a record of trading ethanol, but traders cannot veto new entrants.
In addition to examining access, investigators are looking for evidence of price rigging. This might involve attempts to move a price up or down by just a few cents, for example, by submitting unrealistic bids or offers or concluding transactions away from the prevailing price. Platts says its price reporters disregard prices unrepresentative of the market, making it hard for contributors to manipulate its assessments.
Still, regulators' scrutiny of the physical oil market has been growing ever since oil prices hit record levels in 2008. The Commisison investigation has also drawn the glare of the press.
Under instruction from the G20, Iosco, an umbrella body of market regulators, published a code of conduct for oil-price reporting agencies last year. Companies such as Platts are now undergoing their first external audits by accountants.
Read the full story at [http://www.owon-smart.com/AMI-Home-Energy-Monitor_24!]
Platts, a relatively small cog in New York-listed McGraw-Hill Financial, proudly calls itself an organisation of journalists. Yet Platts has more importance to the giant energy companies, trading houses and investment banks that trade oil than any other media organisation.
Platts reporters monitor bids and offers for products from the blends that make up Dated Brent - the international crude benchmark - to jet fuel. Each day they publish prices or "assessments" that are used by traders to price oil deals worldwide.
A Platts assessment underpins the Brent futures market, used by airlines to protect against price moves and by hedge funds to speculate; the British government uses Platts assessments to calculate taxes on oil producers; and ultimately Platts' prices play a part in the cost of petrol at the pump.
"You need to have a dialogue with Jorge. If you don't, he could keep you out [of the oil market] forever," says an executive at a large Swiss-based commodity trading house.
Platts executives, who responded on his behalf, acknowledge Mr Montepeque's outsize profile but play down his actual power: "No one would deny that Jorge is a big personality in the oil market but decisions do not rest with one person," says Dan Tanz, head of editorial.
Prices in the oil market are notoriously difficult to track. Trade is fragmented into hundreds of different blends of crude oil and regional markets for refined products, such as petrol and diesel.
Individual reporters at companies such as Platts are responsible for assessing many thinly traded markets at the same time. Traders can choose which transactions to report and, with billions of dollars at stake, there is a strong incentive to fix prices.
"The game of having a leveraged position in the futures market and then trying to change the Platts price by a few cents is as old as the market itself," says one trader.
Some companies do not co-operate with price reporters at all. If no transactions take place in a market on a given day reporters have to estimate prices based on quotes, introducing a subjectivity to the process that is unpopular with regulators after Libor.
Mr Montepeque is credited with bringing order to a market that had previously relied even more on judgment. He designed what is known as the "Platts window" in Singapore in the 1990s, before introducing it to the European and US markets.
As global director for market reporting in London, Mr Montepeque continues to oversee and fine tune the methodology and, with colleagues, reviews applications from traders wishing to submit prices.
In the window - a tightly controlled 30-minute period at the end of the day - authorised companies electronically submit bids and offers to Platts reporters. If those bids are met, a company has to trade. Platts is free to publish all data.
"Let's be clear - the window is more rigorous, more transparent and more accurate than what went before," says one veteran trader, who is otherwise critical of Mr Montepeque.
But Mr Montepeque's system is now at the centre of a European Commission competition probe. Pannonia Ethanol, a Hungarian company, has complained that it was denied access to the window for ethanol trading, and at least two of the raids focused on ethanol market records, according to people familiar with the situation.
Platts declines to say why Pannonia was refused entry to the window but says the application process is clear-cut and clearly communicated to candidates. Companies already active in the window would have been consulted on whether Pannonia had a record of trading ethanol, but traders cannot veto new entrants.
In addition to examining access, investigators are looking for evidence of price rigging. This might involve attempts to move a price up or down by just a few cents, for example, by submitting unrealistic bids or offers or concluding transactions away from the prevailing price. Platts says its price reporters disregard prices unrepresentative of the market, making it hard for contributors to manipulate its assessments.
Still, regulators' scrutiny of the physical oil market has been growing ever since oil prices hit record levels in 2008. The Commisison investigation has also drawn the glare of the press.
Under instruction from the G20, Iosco, an umbrella body of market regulators, published a code of conduct for oil-price reporting agencies last year. Companies such as Platts are now undergoing their first external audits by accountants.
Read the full story at [http://www.owon-smart.com/AMI-Home-Energy-Monitor_24!]