Following the raids on the London office of the lead oil price publisher Platts over suspicions of manipulating oil prices in the market, the European Union has decided to introduce tough new rules that would effectively prevent price reporting agencies from operating.
Bloomberg has stated that the draft law is unlikely to take effect before 2014, but once approved and implemented it will give the job of regulating top benchmarks such as Libor and oil, to the European Securities and Markets Authority (ESMA), based in Paris.
A senior industry official has described the regulation as heavy-handed, saying that "if it's applied as written, it will make oil price reporting unworkable. These rules were designed for Libor and have nothing to do with open markets."
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It is true that the laws are mainly aimed at Libor, to prevent a reoccurrence of the rate-rigging scandal that occurred in 2012, but the accusations of price manipulation made earlier this year have caused fears that a similar scandal may happen in the oil market.
A Platts spokeswoman said, "we share the EC view that benchmarks should be robust, reliable and promote confidence in the marketplace. But we are wary of any measures that could discourage participation in the price reporting process, inadvertently reversing the progress made in recent years in promoting transparency of pricing in energy and other commodity markets."
Price publishing agencies have argued that the commodities markets, such as oil, are very different to rates markets, such as Libor, and that they should not be controlled by an external organisation in such a way.
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com More