What used to be the most used reference points on the commodity markets have been under accusation for some time. The majority of operators consider them too subject to manipulation, to artificial movements that make benchmarks opaque, whether it be oil or metals. The events that brought some of the managers of the Libor (the London interbank rate) and the fixing on precious metals to the dock are well known. Just as the methodologies with which fuel indicator prices are elaborated have been criticized for some time, in particular the Brent dated which is published daily by Platts, the specialized agency headed by McGraw-Hill.
In recent days, however, a report was drawn up, published today by the law firm Clyde & Co., according to which 64% of the 170 operators questioned would have criticized the methods used to set the benchmarks. Methods that are too incomplete, not very representative, easy to manipulate, not entirely independent. Trust therefore fails, while conspiracy theories proliferate to artificially move quotations.
The commodities affected by the suspicions of lack of transparency in the indication of prices are many. Question marks focus on coal, iron ore, fertilizers, natural gas, oil, some metals. Moreover, several operators, at least 30% of the interviewees, are convinced of the correctness with which the benchmarks are elaborated and use them with satisfaction. The fact remains that the European Commission has proposed new rules for financial and commodity benchmarks.
Those who administer them should be authorized and subject to supervision and should base the calculation method on actual transactions and not on requests and offers which do not lead to a real sale or purchase. However, the latter hypothesis is contested by Nick Edwards, director of the Cru Group (Commodities Research Unit): "If transactions were the only basis for fixing prices, there would be a perverse effect on physical markets, especially on less liquid ones" .
