Tue Apr 21, 2015 10:30pm EDT
Noble Group barred from Platts’ oil pricing process – sources
SINGAPORE, APRIL 22 | BY HENNING GLOYSTEIN
(Reuters) – Commodity trader Noble Group has been barred from taking part in some of the trading processes used to set global oil price benchmarks by reporting agency Platts, according to two people familiar with the matter.
Noble, the Singapore-listed merchant that has been battling criticism of its accounting practices this year, is not able to act as a “market maker” – actively offering both bids and offers to facilitate trading – in the half-hour trading process run by Platts, part of McGraw Hill Financials Inc.Criticism of Noble, triggered by little-known research firm Iceberg, is related to it allegedly inflating asset values through aggressive accounting. Noble has strongly rejected the accusations, and started legal action against one of its former employees that it says is behind Iceberg.
Contacted by Reuters, Noble would not comment on its specific involvement in Platts’ pricing process.
“We (Noble) buy or sell various oil products every day on Platts and our daily business around the globe is normal,” said a spokesman representing the firm.
Platts spokesperson Kathleen Tanzy said by email: “Platts doesn’t comment on the participation of individual companies, nor do we confirm or deny reviews of companies participating in our price assessment processes.”
One of the sources said Noble could still take bids or offers made by other companies during Platts’ market-on-close (MOC) process, when Platts uses trades, bids and offers to set physical oil prices around the world. Its benchmarks are used to settle billions of dollars worth of oil contracts.
Platts has temporarily barred firms from participation in its MOC before due to market turmoil or concerns over individual companies or trading behaviour. Often the exclusion is brief.
Noble is still trading in the derivatives markets, the sources said.
Reuters could not establish why Noble had been barred from the process.
Previously, Platts has temporarily prevented companies from taking part in the MOC due to concerns that potential counterparties may not be able to trade with the firm, sometimes due to concerns over credit ratings.
Other reasons for being ‘boxed’ – or excluded from the MOC – include inappropriate trading behavior or breaching the terms of a given deal.
The company says on its website that, as part of its methodology, it is “selective as to which companies are permitted to participate in its price assessment process.”
Platts only accepts data “provided by reputable companies that meet counterparty acceptance criteria and comply with the guidelines Platts has set to govern the MOC process.”
Platts competes with Thomson Reuters in providing news and information to the energy markets.
There is no indication that Noble’s ability to trade outside the Platts process – where most oil deals are conducted – has been affected.
Noble has been under increased scrutiny this year after Iceberg Research’s allegations.
The company has staunchly defended itself, and its shareholders approved the company’s annual accounts last week.
However it has also pledged to be more transparent, issuing a statement on Wednesday saying it is considering disclosing more about its fair value accounting practices in its upcoming results.
Noble’s shares have fallen as much as one third, or S$2.56 billion ($1.88 billion), this year and its credit default swaps (CDS) — a measure of its default risk that is closely watched by trading counterparties — have almost doubled to their highest since 2011.
The company is due to publish first quarter 2015 results on May 7.