The design and implementation of Platts’ control procedures …...Americas Refined Oil Products...

The design and implementation of Platts’ control procedures to effectively address the provisions of the Principles for Oil Price Reporting Agencies published

by the International Organization of Securities Commissions (IOSCO)

As at 30th September 2013

Disclaimer: This report is intended solely for the purpose of reporting on the design and implementation of Platts’ control procedures of the Platts Methodology Framework as they relate to the provisions of the Principles for Oil Price Reporting Agencies as published by the International Organization of Securities Commission (IOSCO). Ernst & Young have been appointed as external auditors to “review and report on the PRA’s adherence to its stated methodology criteria and with the requirements of the principles” in accordance with principle 2.21.

The report should be read in full to understand the procedures performed, the conclusions reached and any limitations.

For the avoidance of doubt, McGraw Hill Financial and Ernst & Young accept no duty of care or responsibility to the recipient or any other party into whose hands this report may come and you are not permitted, to copy or forward the report or any part of it to any other parties.

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TABLE OF CONTENTS

SECTION 1Platts’ Methodology and Control Frameworks Overview ----------------------------------------3

1. Introduction -----------------------------------------------------------------------------------------------------4

2. Overview of operations ----------------------------------------------------------------------------------------42.1 Organisation and business ------------------------------------------------------------------------------------------ 4

2.2 Control environment -------------------------------------------------------------------------------------------------- 4

3. 3. Platts Assessments in Scope -------------------------------------------------------------------------------6

4. Platts’ Approach to implementation of the IOSCO Principles for Oil Price Reporting Agencies ---- 104.1 Methodology Documentation -------------------------------------------------------------------------------------- 10

4.2 Methodology Review and Change --------------------------------------------------------------------------------- 16

4.3 Market Data ---------------------------------------------------------------------------------------------------------- 17

4.4 Assessments --------------------------------------------------------------------------------------------------------- 18

4.5 Editorial Skills and Training ----------------------------------------------------------------------------------------- 20

4.6 Quality and Risk Management ------------------------------------------------------------------------------------- 20

SECTION 2Platts Executives’ Statement ---------------------------------------------------------------------- 26

SECTION 3Independent Assurance Report ------------------------------------------------------------------- 28

SECTION 4IOSCO Principles for Oil Price Reporting Agencies and Responses -------------------------- 31

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SECTION 1

Platts’ Methodology and Control Frameworks Overview

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SECTIoN 1: PlaTTS’ METhodology aNd CoNTrol FraMEworkS ovErvIEw

1. INTrOduCTIONThe Principles for Oil Price Reporting Agencies (‘PRA Principles’), as published by the International Organization of Securities Commissions (IOSCO) on the 5 October 2012, stipulate that a PRA report on its methodology criteria to address the provisions of the IOSCO Principles and also provide that a PRA should appoint an independent, external auditor with appropriate experience and capability to review and report on the PRA’s statement.

Platts has provided this report, detailing the design and operation of Platts’ control procedures of the Platts Methodology Framework as they relate to the provisions of the PRA Principles that were in place as at 30 September 2013.

Platts appointed Ernst and Young LLP (EY) to provide independent reasonable assurance that the Platts Methodology Framework and the requirements of the PRA Principles will have been achieved if the described control procedures were complied with satisfactorily.

2. OvErvIEw OF OpErATIONS

2.1 ORgAnISATIOn AnD buSInESSPlatts, a division of McGraw Hill Financial, publishes news, fundamental data, pricing information, and other analysis across commodity markets, including oil, natural gas, electricity, emissions, petrochemicals, coal, and metals. Platts’ products and services include real-time news and market alerts, price assessments and indices, newsletters and reports, maps, conferences, and events.

This report applies solely to processes surrounding the oil price assessments produced by Platts that are referenced by the terms of derivatives contracts. Platts price assessments in scope are listed in section 3 of this report.

2.2 COnTROl EnvIROnMEnTPlatts has a robust governance structure in place to ensure the business is conducted responsibly, effectively, and with due regard for all stakeholders’ interests.

Platts operates through an Executive Committee, chaired by the President of Platts, which is responsible for delivering the strategic goals set by Platts and agreed with McGraw Hill Financial. The Executive Committee comprises senior executive managers within Platts.

Platts’ Executive Committee delegates responsibility for the day-to-day management of Platts to an Oversight Committee chaired by Platts’ President and attended by the Vice President of Editorial, the Vice President of Quality and Risk Management, and a representative from the legal team of McGraw Hill Financial. Depending on agenda, other executive managers of Platts may also be required to attend meetings.

The responsibilities of the Platts Oversight Committee includes the requirement of the committee to consider significant changes of share ownership in McGraw Hill Financial that might cause conflicts of interest for the Platts business and, if these exist, to inform clients where appropriate as soon as practical.

General managers reporting to the President of Platts manage the following vertical business lines within Platts:

� Oil

� Petrochemicals

� Metals and Agriculture

� Power

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These business verticals are supported through horizontal functional teams. The managers of these functions report to the President of Platts:

� Editorial

� Sales

� Finance

� Quality and Risk Management

� Information Technology

� Strategy

� Global Trading Services

Legal and Human Resources functions are supported by staff assigned directly from McGraw Hill Financial.

Platts has adopted a three-tier risk governance framework, often described as the “three lines of defence” model, which distinguishes among management, control and assurance of risk, and compliance management.

As an element of this first line of defence, Platts has created a Markets and Assessments Quality team within the editorial function that is charged with monitoring day-to-day control activities and performing periodic testing to ensure editorial practices, systems, and pricing standards that are undertaken by separate editorial teams operate in accordance with published specifications. The function is designed to advise and enhance the quality of a range of operational activities including those related to production, editorial operations, and integrity.

To reinforce the independence of the Platts Editorial Group performing the price assessment function, Platts maintains clear structural and operational separation between its price assessment activities and other commercial activities to avoid actual or perceived conflicts of interest.

Platts’ Quality and Risk Management function is responsible for undertaking risk assessments and providing advice on remediation and management of a controls regime that reviews compliance and adherence to policies and methodologies. The function also is responsible for reviewing business controls, measuring their effectiveness, and providing advice on changes that should be made in order to improve Platts’ operational performance.

McGraw Hill Financial has a Code of Business Ethics supported by policies that set out the standards of behaviour it requires for all employees. Additionally, Platts has a comprehensive set of specific processes, risk policies, and standards designed to ensure that the business is managed prudently and consistently.

Platts executives are responsible for ensuring that policies exist to address the specific types of risk that Platts faces as a business and to act effectively as divisional-level controls.

Adhering to policies is mandatory. Any dispensations require formal prior approval.

A rolling program of policy review and training is delivered which ensures policies are current and policy awareness is maintained throughout the business. The Quality and Risk Management team are also responsible for managing requests for any policy variations or dispensations.

As well as adhering to the McGraw Hill Financial Code of Business Ethics, employees must regularly provide compliance certifications, complete conflicts of interest disclosure questionnaires, complete certain training programs, and satisfy other compliance-related requirements as part of Platts’ annual compliance program.

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Any requested policy dispensations require executive approval and may be granted subject to conditions imposed by Platts to ensure the potential conflict of interest is properly managed within Platts.

Subject to any applicable legal or regulatory restrictions or rights or obligations, including relating to Platts’ receipt, use or disclosure of confidential or otherwise sensitive information, Platts will cooperate with proper and legitimate enquiries or investigations regarding third parties by regulatory or governmental authorities.

3. pLATTS ASSESSmENTS IN SCOpEAs at 30th September 2013, there are 613 derivative contracts which reference 79 Platts price assessments and therefore fall within scope of the PRA Principles as follows:

Benchmark No of Associated Derivatives

Assessment Location

Name in Methodology Guide Methodology Guide

Crude Dated Brent 17 LONDON Dated Brent Crude Oil

Crude Urals (Mediterranean) 2 LONDON Urals (Mediterranean) Crude Oil

Crude Urals (Rotterdam) 2 LONDON Urals (Rotterdam) Crude Oil

Crude Brent CFD vs.Brent Second Month 16 LONDON Brent CFD (Week 1) Crude Oil

Crude Brent Cash BFOE M1 5 LONDON Brent M1 (London Close) Crude Oil



Crude Dubai 17 SINGAPORE Dubai M1 Crude Oil

Crude Oman 1 SINGAPORE Oman M1 Crude Oil

Crude ESPO (FOB Kozmino) Russian Urals/ESPO spot assessments

1 LONDON ESPO (FOB Kozmino) London Close Crude Oil

Crude ESPO Diff to Dubai or ICP (Asian MOC)

1 SINGAPORE ESPO M1 vs Dubai Crude Oil

Crude Mediterranean Dated Strip 2 LONDON Mediterranean Dated Brent Strip Crude Oil

Gasoline Chicago Unleaded 87 gasoline (pipeline)

2 HOUSTON Gasoline Unl 87 Chicago Pipeline Americas Refined Oil Products

Gasoline Premium Unleaded 10 ppm CIF MED Cargoes

3 LONDON Gasoline Prem Unleaded 10ppmS CIF Med Cargo

Europe and Africa Refined Oil Products

Gasoline Premium Unleaded 10ppm FOB Med Cargoes

4 LONDON Gasoline Prem Unleaded 10ppmS FOB Med Cargo


Gasoline Singapore Mogas 92 14 SINGAPORE Gasoline Unl 92 FOB Spore Cargo Asia Pacific & Middle East Refined Oil Products



Gasoline Gulf Coast Unl 87 Gasoline (Pipeline) M2

4 HOUSTON Gasoline Unl 87 USGC Pipeline Supplemental

Americas Refined Oil Products

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Gasoline Group Three Unleaded 2 HOUSTON Gasoline Unl 87 Group 3 Pipeline Americas Refined Oil Products

Gasoline Gulf Coast CBOB A1 3 HOUSTON Gasoline CBOB 87 USGC Houston Prompt Pipeline


Gasoline Gulf Coast CBOB A2 3 HOUSTON Gasoline CBOB 87 USGC Pipeline Supplemental


Gasoline Gulf Coast Unl 87 Gasoline (Pipeline)

M1

6 HOUSTON Gasoline Unl 87 USGC Prompt Pipeline


Gasoline NY RBOB

(Barge)

2 HOUSTON Gasoline RBOB NY Barge Americas Refined Oil Products

Gasoline Platts 3:15 PM ET RBOB 2nd Month Futures Assessment

1 HOUSTON Nymex RBOB at Houston MOC Mo02


Gasoline Platts 3:15 PM ET RBOB Futures Assessment

1 HOUSTON Nymex RBOB at Houston MOC Mo01


Gasoline Premium Unleaded 10 ppm FOB Rdam Barges

2 LONDON Gasoline Prem Unleaded 10ppmS FOB Rdam Barges


Gasoline Premium Unleaded 10 ppm CIF NWE Cargoes

2 LONDON Gasoline 10ppmS CIF NWE Cargo Europe and Africa Refined Oil Products

Naphtha European Cargoes CIF NWE basis ARA

18 LONDON Naphtha CIF NWE Cargo Europe and Africa Refined Oil Products

Naphtha Japan C&F Naphtha 11 SINGAPORE Naphtha C+F Japan Cargo Asia Pacific & Middle East Refined Oil Products

Naphtha Singapore FOB Naphtha 5 SINGAPORE Naphtha FOB Singapore Cargo Asia Pacific & Middle East Refined Oil Products

Jet Kero European FOB Rdam Barges 7 LONDON Jet FOB Rdam Barge Europe and Africa Refined Oil Products

Jet Kero European Cargoes CIF NWE 14 LONDON Jet CIF NWE Cargo Europe and Africa Refined Oil Products

Jet Kero Gulf Coast Jet/Kero 54 (Pipeline)

9 HOUSTON Jet Kero 54 USGC Prompt Pipeline Americas Refined Oil Products

Jet Kero Jet Aviation

Fuel Cargoes FOB MED

2 LONDON Jet FOB Med Cargo Europe and Africa Refined Oil Products

Jet Kero Los Angeles Jet Fuel (Pipeline) 1 HOUSTON Jet Kero ULS No 1 Group 3 Pipeline


Jet Kero NY Jet Fuel (Barge) 2 HOUSTON Jet Kero New Jersey Buckeye Pipeline


Jet Kero Singapore Jet 17 SINGAPORE Jet Kero FOB Spore Cargo Asia Pacific & Middle East Refined Oil Products


Assessment Location


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Diesel 10ppm (UK) CIF NWE Cargoes 5 LONDON ULSD 10ppmS CIF NWE Basis UK Cargo


Diesel ULSD US Gulf Coast (Pipeline) 11 HOUSTON ULSD USGC Prompt Pipeline Americas Refined Oil Products

Gasoil 0.1 FOB NWE Cargoes 2 LONDON Gasoil 0.1%S FOB NWE Cargo Europe and Africa Refined Oil Products

Gasoil 0.1% CIF NWE Cargoes 11 LONDON Gasoil 0.1%S CIF NWE Cargo Europe and Africa Refined Oil Products

Gasoil 0.1% CIF Med Cargoes 13 LONDON Gasoil .1%S (1000ppm) CIF Med Cargo


Gasoil 0.1% FOB Rotterdam Barges 16 LONDON Gasoil .1%S (1000ppm) FOB ARA Barge


Gasoil 50ppm FOB Rotterdam Barges 13 LONDON Gasoil .005%S (50ppm) FOB ARA Barge


Gasoil Gulf Coast No. 2 (Pipeline) 4 HOUSTON Gasoil No 2 USGC Prompt Pipeline Americas Refined Oil Products

Gasoil Heating Oil Platts 3:15 PM ET 2nd Month Futures Assessment

1 HOUSTON Nymex Heating Oil at Houston MOC Mo01


Gasoil Heating Oil Platts Platts 3:15 PM ET futures Assessment

1 HOUSTON Nymex Heating Oil at Houston MOC Mo02


Gasoil NY No. 2 (Barge) 2 HOUSTON Gasoil No 2 New York Harbor Barge


Diesel 10ppm CIF NWE (Le Havre) Cargoes

4 LONDON ULSD 10ppmS CIF NWE Basis Le Havre Cargo


Gasoil Singapore 0.05% Sulfur 3 SINGAPORE Gasoil .05% S (500ppm) FOB Spore Cargo

Asia Pacific & Middle East Refined Oil Products

Gasoil Singapore 10 ppm 6 SINGAPORE Gasoil .001% S(10ppm) FOB Spore Cargo


Gasoil Singapore Gasoil 29 SINGAPORE Gasoil FOB Spore Cargo Asia Pacific & Middle East Refined Oil Products

Gasoil 0.1% FOB Med Cargoes 1 LONDON Gasoil 0.1%S FOB Med Cargo Europe and Africa Refined Oil Products

Diesel 10ppm CIF NWE/Basis ARA Cargoes

9 LONDON ULSD 10ppmS CIF NWE Cargo Europe and Africa Refined Oil Products

Diesel 10ppm FOB Rotterdam Barges 14 LONDON ULSD 10ppmS FOB Rdam Barge Europe and Africa Refined Oil Products

Diesel Chicago ULSD (pipeline) 2 HOUSTON ULSD FOB Chicago Pipe Americas Refined Oil Products

Diesel Group Three ULSD 2 HOUSTON ULSD Group 3 Pipeline Americas Refined Oil Products

Diesel NY ULSD (Barge) 2 HOUSTON ULSD New York Harbor Barge Americas Refined Oil Products

Diesel ULSD 10ppm CIF Med Cargoes 18 LONDON ULSD 10ppmS CIF Med Cargo Europe and Africa Refined Oil Products

Fuel Oil 1% CIF Med Cargoes 5 LONDON FO 1%S CIF Med Cargo Europe and Africa Refined Oil Products


Assessment Location


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Fuel Oil Gulf Coast No. 6 3.0%S (Waterborne)

21 HOUSTON FO No 6 3.0% S USGC Waterborne Americas Refined Oil Products

Fuel Oil New York No. 6 1.0% Max (Waterborne Cargo)

20 HOUSTON FO No 6 1.0% New York Harbor Delivered Cargo


Fuel Oil NY 0.3% Fuel Oil HiPr 4 HOUSTON FO No 6 0.3% HP New York Harbor Delivered Cargo


Fuel Oil NY 0.7% Fuel Oil 3 HOUSTON FO No 6 0.7% New York Harbor Delivered Cargo






Fuel Oil 1% CIF NWE Cargoes 4 LONDON FO 1%S CIF NWE Cargo Europe and Africa Refined Oil Products

Fuel Oil Singapore 180CST 31 SINGAPORE FO 180 CST 3.5% S FOB Spore Cargo


Fuel Oil Singapore 380CST 25 SINGAPORE FO 380 CST 3.5% S FOB Spore Cargo


Fuel Oil SR 0.5-0.7% FOB NWE Cargoes 1 LONDON Straight run 0.5-0.7%S FOB NWE Cargo


Fuel Oil 1% FOB Med Cargoes 8 LONDON FO 1%S FOB Med Cargo Europe and Africa Refined Oil Products

Fuel Oil 1% FOB NWE Cargoes 27 LONDON FO 1%S FOB NWE Cargo Europe and Africa Refined Oil Products

Fuel Oil 1% FOB Rotterdam Barges 8 LONDON FO 1%S FOB Rdam Barge Europe and Africa Refined Oil Products

Fuel Oil 3.5% CIF Med Cargoes 4 LONDON FO 3.5%S CIF Med Cargo Europe and Africa Refined Oil Products

Fuel Oil 3.5% FOB Med Cargoes 11 LONDON FO 3.5%S FOB Med Cargo Europe and Africa Refined Oil Products

Fuel Oil 3.5% FOB Rotterdam Barges 38 LONDON FO 3.5%S FOB Rdam Barge Europe and Africa Refined Oil Products

Freight: AG to Japan Clean Tankers (TC5)

3 SINGAPORE Clean Arab Gulf-Japan 55kt LR1 $/mt

Freight

Freight: Singapore to Japan Clean Tankers (TC4)

2 SINGAPORE Clean Singapore-Japan 30kt MR $/mt

Freight


Assessment Location


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4. pLATTS’ ApprOACh TO ImpLEmENTATION OF ThE IOSCO prINCIpLES FOr OIL prICE rEpOrTINg AgENCIESWithin Platts, responsibility for the implementation of the PRA Principles , has been delegated to a steering committee chaired jointly by the Vice President of Editorial and the Vice President of Quality and Risk Management.

Platts grouped the PRA Principles into six work streams as follows:

� Methodology Documentation

� Methodology Review and Change

� Market Data

� Assessments

� Editorial Skills and Training

� Quality and Risk Management.

Below we describe the controls and processes required to demonstrate alignment with the PRA Principles for each of the above work streams.

4.1 METhODOlOgy DOCuMEnTATIOnClearly defined and transparent methodologies are the backbone of Platts’ price assessment processes. Platts’ methodologies provide detailed descriptions and explanations of how Platts assesses the market value of commodities so that customers and other interested parties can understand those processes.

Platts has created a methodology template that combines the PRA Principles with Platts’ existing best practice. We have applied this template to all of Platts’ Methodology and Specifications Guides for the oil sector.

Platts’ Methodology and Specifications Guides that relate to the assessments produced by Platts that fall within scope of the PRA Principles are:

� Crude Oil

� Americas Refined Oil Products

� Asia Pacific & Middle East Refined Oil Products

� Europe and Africa Refined Oil Products

� Freight

Platts’ methodologies are designed to produce price assessments that are representative of market value of the particular markets to which they relate. Platts’ Methodology and Specifications Guides include descriptions of the specifications for the different products for which Platts publishes assessments. These guides also describe the processes and standards Platts adheres to in collecting data, and the methods by which Platts arrives at final assessment values for publication. These guides are available on http://www.platts.com for public review.

The guides to methodology for indices and assessments are divided into seven major parts (I-VII) that parallel the process of producing the end-of-day price values.

http://www.platts.com

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Part I, Data Quality and Data Submission, describes what goes into Platts’ indices and price values, including details on the data that market participants are expected to submit, the process for submitting data, and criteria for timeliness of market data submissions. Platts accepts information provided for publication in real time across a wide variety of media. Platts’ editorial staff accepts the following reporting methods:

� Standard Instant Messaging software

� eWindow software (owned, managed and maintained by Intercontinental Exchange, Inc. (ICE))

� Telephone

� Email

� Fax

Platts publishes Oil Timing Increment Guidelines with the Methodology and Specifications Guides on http://www.platts.com.

Platts encourages entities that submit any market data for consideration in its assessment processes to submit all market data that is relevant to the assessment being made. Platts’ aim is to have information about the circumstances surrounding all reported transactional data, including details of quality, specifications, order sizes, dimensions, lead times, and any locational and loading/delivery information. Platts uses that information to determine a typical and repeatable market level for the physical crude oil, physical refined products, or freight being assessed.

Part II, Security and Confidentiality, describes any security and confidentiality practices that Platts uses in handling and treating data. All data is stored in a secure network, in accordance with Platts’ policies and procedures. Platts’ physical crude oil, physical refined products, freight, and derivative assessments are produced in accordance with Platts’ Market on Close (MOC) assessment methodology. Data for use in Platts’ oil assessments may be published by Platts’ editorial staff while assessing the value of the markets. Given the nature and maturity of the oil markets, Platts believes that subscribers should be able to review and analyse the market data that is provided for use in its oil assessments, and Platts therefore does not have confidentiality agreements for information provided for use in oil product or spot freight assessments.

Part III, Calculating Indices and Making Assessments, provides a detailed account of how Platts collects bids, offers, trades, and other market data and what Platts does with the data to formulate its indices and assessments. This section explains the reasoning behind reference units used and includes descriptions of how Platts uses specific volumes, concluded and reported transactions, bids, offers, and any other market information it has collected to formulate its price assessments. The process of “normalisation” is a technique applied by Platts to align reported market information to reflect the economic relationship between specific reported activity and the base standard reflected in Platts’ price assessments. Part lll also describes how and when judgment is applied in this process, the basis upon which transaction data may be excluded from a price assessment, and the relative importance assigned to each criterion used in forming the price assessment. This section describes how Platts addresses assessment periods in which one or more reporting entities submit market data that constitute a significant proportion of the total data upon which the assessment is based.

Descriptions of the methods Platts uses for reviewing data are described together with the methods used to convert raw data into indices and assessments, including the procedures used to identify anomalous data. Platts defines anomalous data as any information, including transactions, which is inconsistent with or deviates from Platts’ methodology or standard market conventions.

Platts does not specify a minimum amount of transaction data, or a transaction data threshold, for the publication of its oil price assessments. Physical commodity markets vary in liquidity. Any particular market analysed on its own typically will demonstrate rising and falling levels of transactions through time. Platts is committed to providing an assessment of value for every market that it covers as long as a genuine underlying market continues to exist, equally in times of heightened or reduced liquidity.

Platts seeks to receive market information from as broad a cross-section of the market as possible. If a very limited number of market-makers are active in the market, or if a limited number submit data that constitutes a significant proportion of the total


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data on which the assessment is based, Platts will continue to seek fully transparent and verifiable data from the market at large and to apply Platts’ methodology principles of transparency and time sensitivity. For consideration in the MOC process, such a participant’s bids or offers must be clearly available for execution by any other MOC participant.

Normalisation price adjustment techniquesPlatts seeks to align the standard specifications for the oil markets it assesses and the timestamps reflected in its assessments with standard industry practices. However, physical commodity markets are generally heterogeneous in nature: not only can time of transactional activity considered for inclusion in the price assessment process vary through the day; other key attributes often vary from the base standard reflected in Platts’ assessments as oil is supplied to market.

The quality of fuel supplied, delivery location, and other specific terms of trade may be varied in the physical commodity markets that Platts assesses. This is one reason why Platts believes data collected from the physical oil markets should not be averaged to produce a representative benchmark value in oil markets.

Because of the complex nature of the physical oil markets, oil market data must be aligned with standard definitions to allow for a fully representative final published assessment. Platts aligns data collected through an analysis of the physical oil markets with its standard assessment specifications through a process called normalisation.

By surveying markets and observing the economic impact of variance from the base standard reflected in Platts’ assessments, Platts regularly normalises disparate information from the diverse physical commodity markets back to the standard reflected in Platts’ price assessments. This is done by analysing freight rates (for locational differences), quality premiums (for quality differences), the movements of all markets through time (for time differences), and other premiums associated with the size of trades and delivery terms.

Normalisation for time may be done by analysing movement in a related market observed through time, and that movement may provide a basis by which to align market value of an earlier reported bid, offer, or transaction to market value at the MOC close. This alignment for time is essential to ensure that Platts’ price assessments reflect the prevailing value of a market at the close of the MOC process.

Prioritising dataPlatts’ assessment process considers firm bids, firm offers, and transactions that are transparent and open to any counterparty with the proper financial and operational resources. Bids, offers, or transactions that are not transparent may not be reflected in the assessment process. Also, bids above transparent offers or offers below transparent bids are not reflected in the assessment process. Platts includes changes to bids or offers when those changes are made transparently and in normal increments.

The level of each bid or offer must stand firm in the marketplace long enough for any counterparty to hit the bid or lift the offer; if that does not occur, the bid or offer may be deemed non-executable. Platts may not consider bids, offers, or transactions that reflect market “gapping;” i.e., changes that are in excess of normal market practice.

Transparency underpins Platts’ assessment process, just as it does Platts’ data publishing processes, in the oil markets. When determining a final market assessment, Platts gives the greatest priority to fully verifiable and transparent market information. A firm bid or offer that has been published by Platts in accordance with its data publishing standards, and which still stands open to the market at the close of the assessment process, will establish clear parameters for Platts’ final published assessments. Platts typically will assess market value somewhere between the best bid and best offer open to the market at the close of the MOC process. This helps ensure that Platts’ assessments reflect the transactable value of the commodities it is assessing at the close of the market.

Completed, transparent transactions that are published by Platts are important in helping establish where trading interest prevails in the market and may help determine where, in a bid/offer spread, Platts assesses value for publication.

Firm bids and offers that are available to the market take precedence over trades that have been concluded earlier in the assessment process when establishing the value of the market, particularly if bids are available at the close above previously traded levels, or offers are available to the market below previously traded levels. Price is a function of time.

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When no bid, offer, or transaction data exists, Platts may consider other verifiable data reported and published through the day, including fully and partially confirmed trades, notional trading values and other market information as provided for publication. Under such circumstances, Platts also may be able to observe direct market activity or the effect of commonly traded commodities on illiquid markets via spread differentials or via blending and shipping economics.

Platts also analyses the relationships between different products and factors these relationships into assessments for markets where transactional data is at low levels. Finally, Platts normalises other available data that may be relevant to the assessment during periods when no or low amounts of transactional data exists, including transactional data from related markets, in the manner described above.

To do this, Platts takes into account representative transactions executed at arm’s length in the market during the MOC price assessment period as well as bid and offer information submitted during this period. Platts market reporters seek direct verification from the principals to a reported bid, offer, or deal.

Platts MOC guidelines are designed to avoid any distortion of the final price assessment; therefore, inputs that are not verifiable are eliminated and “one-off” or unrepeatable transaction data may be disregarded from the price assessment process.

One-off or unrepeatable transactions may be a reflection of market value. However, such transactions need to be measured against the broad span of similar transactions. If, for instance, a buyer decides to lift an offer but is unwilling to buy more material offered at the same level if the seller reoffers, Platts would determine that the buyer failed the repeatability test. Equally, if the seller does not reoffer, the seller would not pass the repeatability test. As such, the transaction may not be fully reflected in the price assessment.

A variant on this action is price gapping, when bids are made too high and offers are made too low through untested levels of price support or resistance. Platts may not publish such bids and offers during the MOC process. When transactions are concluded at levels that have not been fully tested by the market because price changes have not been incremental, Platts may determine that actual market value is somewhere between the last incremental bid and the transaction at the gapped level.

Assessment calculationsPlatts publishes its assessments reflecting the currencies and units of measurement in which the products typically trade.

Oil is generally traded in US dollars; therefore, Platts’ assessments typically are published in US dollars. Certain markets, such as regional markets, trade using local currency. Platts assesses the value of such markets as appropriate in local currency.

Crude oil is typically traded in barrels or metric tons, and Platts publishes its assessments using these units of measurement. Similarly, refined oil products typically trade in barrels, metric tons, or gallons and Platts’ assessments for these markets reflect standard practice in each market. The minimum and maximum volume considered for each individual Platts assessment of a physical market is described in section Vll of each specific Methodology and Specifications Guide.

In certain cases, Platts converts its assessments to other currencies or units of measurement to allow for ease of comparison or analysis in regional markets. Such conversions are calculated using published exchange rates and conversion factors.

Platts market reporters follow specific methodology when exercising editorial judgement during their assessment process. Platts market reporters apply judgement when determining (1) whether information is suitable for publication, (2) when normalising data, and (3) when determining where to assess final market value.

Judgement may be applied when analysing transactional data to determine if it meets Platts’ standards for publication; judgement also may be applied when normalising values to reflect differences in time, location, and other trading terms when comparing transactional data to the base standard reflected in Platts’ assessments.

All such judgement is subject to review by Platts’ editorial management for adherence to the standards published in Platts’ methodologies.

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To ensure the assessments are robust, Platts’ editorial systems are backed by a strong corporate structure that includes managerial and compliance oversight. Platts also regularly trains and assesses market reporters in their own and each other’s markets to ensure that they consistently follow Platts’ methodological guidelines.

Application of professional judgement guidelines promotes consistency and transparency. Where professional judgement is exercised, market reporters critically analyse and synthesise all information available. Platts manages and maintains internal training guides for each of the different products assessed to assist Platts’ market reporters in producing consistent price assessments. Market reporters are trained to identify potentially anomalous data that does not conform to methodology. Platts’ price assessments are reviewed prior to publication, and exercise of professional judgement is further discussed and verified during this process. Those assessments that are referenced by the terms of derivatives contracts are supported by an assessment rationale, including the application of judgement, which is published with the price assessment, offering transparency to the market.

As a publisher owned by McGraw Hill Financial, neither Platts nor its parent company participates in the markets Platts assesses. Independence and impartiality are central to the work Platts does. Platts has no financial interest in the price of the products or commodities on which it reports. Platts’ aim is to reflect market value.

In the oil markets, Platts focuses primarily on assessing the value of oil trading in the spot market. A spot price for a physical commodity is the value at which a standard, repeatable transaction for merchantable material takes place, or could take place, in the open market at arm’s length. Platts’oil spot price assessments reflect the value at which transactions take place, or could take place, at precisely the close of the MOC process.

Platts’ overall objective is to reflect the transactable value of the commodity assessed. In cases where the apparent value of the commodity includes “optionalities,” the intrinsic value of the commodity may be masked. In such cases, Platts may use its editorial judgement to factor out such extraneous elements from the value of the commodity, or it may decide not to use the bid, offer, or transaction in its assessment process. Optionalities that may alter the value of the commodity include but are not limited to loading or delivery options held by the buyer or seller, volume option tolerances exercisable by the buyer or seller, or quality specifications.

Platts assesses the outright value of crude oils around the world, as well as differentials for those crudes when they trade with reference to a benchmark. Platts analyses all data it collects and publishes throughout the day. Final assessments are above firm bids and below firm offers that stand at the close of the MOC assessment process. This is true for outright values and differentials. In the event of an observed conflict between outright values and differentials, outright values prevail in Platts’ final published assessments.

Platts produces time-sensitive assessments that reflect the value of the markets it covers precisely at the close of the MOC price assessment process in Singapore, Dubai, London, and Houston. By providing clear timestamps for every region, the Platts assessment process is designed to provide price assessments that properly reflect outright and spread values.

As an example, Brent/BFOE crude oil has a value, WTI has a value, and the Brent/BFOE versus WTI spread has a value, and all three make sense when measured on a same-time basis. By contrast, given the nature of the oil markets, a system of averages can lead to inaccuracies in the Brent/BFOE versus WTI spread if the distribution of deals done for WTI and Brent/BFOE differs over the averaging period. For example, if WTI trades actively at the beginning of the assessment period and Brent trades actively at the end of the assessment period in a rising market, the assessed spread value resulting from an averaging process will not be reflective of actual market values. This distortion can arise even if the value of spread trades in their own right has remained constant. The MOC approach reduces the likelihood of such occurrences.

Assessments reflect typical loading and delivery schedules for each market assessed. The standard loading and delivery windows are specified under each data code.

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Market structure such as backwardation and contango1 is also factored into the Platts assessment process. If a company offers a cargo loading 10 days forward, the offer may provide market information for the Platts assessment for cargoes loading 10 days forward. However, Platts would also assess days 11 through 25 (in a 10-25 day market) and publish an assessment that reflects market value 10-25 days forward ahead of the day of assessment.

Part IV, Platts Editorial Standards, explains the process for verifying that published prices comply with Platts’ standards.

Platts employees are required to adhere to the McGraw Hill Financial Code of Business Ethics (COBE) which reflects its commitment to integrity, honesty, and good-faith dealings.

As part of Platts’ annual compliance program, employees must regularly provide compliance certifications, complete conflicts of interest disclosure questionnaires, complete certain training programs, and satisfy other compliance-related requirements.

Market reporters must ensure adherence to published methodologies as well as internal standards that require full records are kept in order to document their work.

Platts has a Quality and Risk Management (QRM) function that is independent of the editorial group and is responsible for ensuring the quality and adherence to Platts’ policies, standards, processes, and procedures.

McGraw Hill Financial’s internal audit department, an independent group that reports directly to the McGraw Hill Financial’s Board of Directors and has no reporting relationship with Platts, is responsible for providing reviews of Platts’ adherence to process.

Part V, Corrections, lays out the verification and correction process for revising published prices and the criteria Platts uses to determine when it publishes a correction. Platts is committed to promptly correcting material errors. Any corrections applied will include only data that was available to Platts when the assessment was calculated.

Part VI, Requests for Clarification of Data and Complaints, explains how users of Platts’ assessments and indices can contact Platts for clarification of data that has been published, or to register a complaint. It also describes where to find details of Platts’ Complaint Management policy.

Platts’ customers raise questions about its methodologies and the approach taken in price assessments, proposed methodology changes, and other editorial decisions in relation to Platts’ price assessments. Platts strongly values these interactions and encourages dialogue concerning any questions a customer or market stakeholder may have.

If a stakeholder is not satisfied with responses received or the services provided by Platts and wishes to escalate matters, detailed information about how to contact Platts to request clarification around an assessment, or make a complaint, is available on the Platts website at: http://www.platts.com/ContactUs/Complaints.

Part VII, Definitions of the Trading Locations for Which Platts Publishes Daily Indices or Assessments, includes detailed specifications for the trading locations and products for which Platts publishes indices or assessments in the specific commodity. This section describes why specific units of measurement are used and what conversion factors are used to move between units of measurement, where relevant.

1 “Backwardation” refers to where the price of a forward/futures contract trades below the expected spot price at contract maturity. In these circumstances prices are higher for prompt loading than for future delivery, resulting in a downward sloping (inverted) price curve. “Contango” is the reverse of this, i.e. the forward/futures price is higher than the expected spot price and prices are therefore higher for future delivery than for prompt delivery (resulting in an upward sloping price curve).

http://www.platts.com/ContactUs/Complaints

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4.2 METhODOlOgy REvIEw AnD ChAngEPlatts follows a clearly defined process for introducing or making changes to its methodologies. This process is based on full transparency and communication with industry stakeholders aimed at gaining market acceptance for any proposed introduction or changes to methodology.

At a minimum, Platts reviews all methodologies annually to ensure they continue to reflect the physical markets under assessment. Platts regularly assesses the relevance of methodologies through continuous contact with the market. Feedback on methodologies is always welcomed by Platts.

Platts’ Oil Policy Board, which reports to the Platts Oversight Committee through an Editorial Management Board, is responsible for the final approval of methodology changes.

A summary of the procedure adopted by Platts for internal and external methodology reviews is published on http://www.platts.com.

Once Platts identifies the need for a methodology change, Platts publishes a Subscriber Note and invites feedback over a specified time period. The timelines vary depending on the nature of the proposed change. On occasion, Platts may need to respond urgently to changing market conditions and may make an Emergency Change. Such changes are communicated via a Subscriber Note setting out the issue and the specific changes being made to the methodology as a result.

After feedback is received and collated, Platts considers information, makes a decision, and issues a Subscriber Note. If Platts decides to proceed with the change, Platts provides additional opportunity for feedback before the change is implemented.

Any written feedback received by Platts in relation to a methodology consultation that has not been marked as confidential will be made available on request.

Platts employs an internal tracking tool for methodology changes which has been developed to ensure controlled internal sign-off at each stage of any change and also provides a clear audit trail.

Platts categorises methodology changes into Major, Minor, or Emergency as follows:

� Major Changes materially alter an assessment and require an update to the methodology specification. Major methodology changes typically are preceded by extensive bilateral discussions with market stakeholders and open public forums. Once formally proposed, major changes are communicated to the market through Subscriber Notes.

� Minor changes are described as routine in nature and generally do not materially affect the assessment. Such changes include any seasonal quality or pipeline cycle changes, additions or deletions of forward, time-rolling assessments, corrections and typographical errors, clarifications, illustrations, or page references.

� Emergency Changes may be conducted when Platts needs to respond urgently to changing market conditions, perhaps precipitated or warranted by a serious event or market situation. Such changes are communicated in a Subscriber Note setting out what the issue is and what changes are to be made.

Discontinuing AssessmentsThere may be occasions when a Platts assessment ceases to be relevant to the marketplace.

Platts generally will provide at least six months’ notice of its intention to discontinue an assessment, although this timeline can be shortened to three months when Platts expects the market impact to be negligible. If an unforeseen event causes a severe disruption in a particular market, the timeline for discontinuing an assessment (sometimes on a temporary basis) may be shortened even further.

As with major methodology changes, Platts will communicate a proposal to discontinue an assessment by publishing a Subscriber Note.


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4.3 MARkET DATAPlatts’ objective is to ensure that the submission of transactional information and other data inputs used to inform price assessments is of the highest quality, as this is crucial to maintaining the integrity of Platts’ price assessment processes.

Platts’ Methodology and Specifications Guides detail how Platts collects market data and what Platts does with the data to formulate its indices and assessments.

Platts operates a Counterparty Acceptance and Review process to ensure the integrity of the data used in its assessment processes. Counterparties with appropriate financial and operational resources, such that they can adhere to Platts’ methodology guidelines, are eligible to participate in the MOC assessment process. In all MOC markets, Platts specifies that transactions reported must be at arm’s length and not conducted between corporate affiliates. If any questions arise about the affiliation between participating parties, Platts will seek detailed information on any relationship for verification before including related data in its price assessment processes.

Platts encourages entities that submit any market data for consideration in the assessment process to submit all relevant market data to the assessment being made. This is reiterated in all Platts Methodology and Specifications Guides as well as in Platts’ Counterparty Acceptance and Review processes.

When a counterparty is accepted, Platts records non-arm’s-length relationships that the counterparty may have with associated entities and other relevant information and updates internal systems accordingly.

Platts editorial staff who have daily contact with the market become acquainted with individuals submitting data from specific counterparties, but a counterparty is responsible for monitoring who is permitted to submit data on its behalf.

The processes and controls Platts has developed to determine the suitability of a counterparty in providing verifiable data for informing Platts price assessments have been designed, together with the data validation checks performed by Platts before an assessment is formulated (described below), to ensure data is of the highest possible quality.

Once a counterparty is accepted by Platts, transactions, firm bids, and offers received from the counterparty are published by Platts in real time for observation and verification by the market. Details published include the identities of buyers and sellers, confirmed prices, volumes, location, and stated trading terms.

By providing transparency in regard to intentions to buy or sell, Platts is able to test the data by publishing firm bids and offers to the market and ultimately generate a price assessment that is market-reflective at the close of MOC.

If Platts receives information from a counterparty that raises concerns about the suitability of that data for inclusion in a Platts price assessment process, a Counterparty Review may be considered.

The Counterparty Review process has been designed to help ensure that any input used to inform the price assessment process is of the highest quality. Platts’ price assessments would be impaired if counterparties do not meet Platts’ guidelines for participation.

Under certain circumstances, Platts may deem it necessary to suspend a counterparty from participating in an MOC assessment process to protect the integrity of information used in the price discovery process. Instances where such action may be appropriate include, but are not limited to, a bid or offer:

� being stated incompletely

� containing options that mask the intrinsic value of a commodity

� specifying delivery outside the date range reflected in the respective Platts methodology

Any decision not to publish trade information from a participant is undertaken through consultation and agreement with senior Platts staff.

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Platts informs the relevant editorial staff of any change to counterparty status via email, and an internal participation status tool is updated. This tool provides information on counterparty status to the editorial team and is referred to during the assessment process as a quality control to ensure data received and used to inform the price discovery process meets Platts’ guidelines.

Anomalous DataPlatts defines anomalous data as any information, including transactions, which is inconsistent with or deviates from Platts’ methodologies or standard market conventions.

Platts’ Methodology and Specifications Guides include descriptions of the methods Platts uses for reviewing data and for formulating indices and assessments from data inputs, including the procedures used to identify anomalous data.

Platts’ MOC guidelines have been designed to avoid distortions of the final price assessment such that inputs which are not verifiable or are “one-off” or unrepeatable transactional data may be disregarded from the price assessment process.

Platts has internal guidelines for market reporters that assist them in identifying anomalous data and highlight the procedures to follow when a market reporter considers an attempt is being made to unduly influence a Platts price assessment such that it would distort the end-of-day assessment value, either through counterparty behaviour or through the submission of potentially anomalous data.

As described above, should Platts consider it necessary to undertake a Counterparty Review as a result of inconsistent information or information that deviates from Platts methodologies or standard market practice, such information may be excluded from informing the price discovery process until Platts can be assured that the information supplied conforms to its methodology guidelines.

The Counterparty Review process establishes the participant’s continued counterparty acceptance, focusing on the ability to execute trades in the specific MOC segment and the participant’s proven ability to meet Platts’ methodology guidelines. Any change in participation status is promptly discussed and communicated with the relevant entity and updated to Platts’ systems internally.

4.4 ASSESSMEnTSIndependence and impartiality are core values at Platts. Platts has no financial interest in the price of the products or commodities on which it reports. Platts goal is to publish price assessments that reflect market value.

Platts’ Methodology and Specifications Guides, available at http://www.platts.com, describe the specifications, processes, and standards that Platts adheres to in collecting data and the methods Platts uses to formulate indices and assessments from data inputs to arrive at final assessment values for publication.

Platts’ MOC guidelines are designed to arrive at final price assessments reflective of market-value by eliminating inputs that are not verifiable and by disregarding one-offs or unrepeatable transactions.

Platts collects and publishes market data throughout the day in order to create a view on price until the end of day, when the assessment is determined. All data informing the assessment must be reflective of market value and verifiable, with bids and offers from named parties being open to the market at large.

Platts market reporters follow the relevant methodology when exercising editorial judgement during the assessment process. Platts market reporters apply judgement when determining:

� whether information is suitable for publication;

� when to apply a technique of data normalisation; and

� when determining final market value.


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All judgment is subject to review by Platts’ editorial management for adherence to the standards published in Platts’ methodologies.

Assessment rationales published by Platts supporting oil price assessments that are referenced by the terms of derivatives contracts explain the use of judgement in determining the assessment and document the data that has been used, the application of any normalisation techniques used, and the exclusion of any transactions that otherwise conformed to the requirements of relevant methodology.

An assessment spreadsheet is maintained by Platts for oil assessments that are referenced by the terms of a derivatives contract. These spreadsheets record the name/s of the person/s completing the assessment and those responsible for checking and approving the assessment prior to publication. Platts regularly checks that the spreadsheet is completed correctly.

For oil price assessments that are referenced by the terms of derivatives contracts, Platts publishes assessment rationales for price assessments to explain how the assessments have been developed.

Platts’ assessment commentaries comprise two parts:

� Market Analysis, which covers the fundamental market conditions that shape prices by affecting supply and de-mand.

� Assessment Rationale, which explains how the benchmark assessment is derived. The rationale highlights trans-actions from the MOC that have been used to inform the assessment as well as any transactions that did not con-form to Platts’ standards and were therefore excluded. The assessment rationale illustrates any judgments made by market reporters in reaching the price assessment.

Platts operates an established process to check price assessments prior to publication. The review ensures that the assessment follows established Platts’ methodology and that the calculations and logic underlying the assessment are well supported. If the reviewer and the market reporter do not agree on any aspect of the assessment, the matter is escalated to a senior manager for resolution before the assessment is published.

Platts maintains documented guidelines covering the assessment process, collection of information, use of judgement, and the documentation required by Platts to validate and support values formulated during the price discovery process. The guidelines also outline the process required for writing and publishing the two different types of commentary — assessment rationale and market analysis — published by Platts for oil assessments that are referenced by the terms of derivatives contracts. The guidelines are designed to be used by Platts market reporters in conjunction with the detailed published descriptions of methodologies for the specific market.

Platts has documented guidelines for dealing with inquiries or questions, challenges of assessments or news reports, and requests for information or clarification that are resolved during the normal course of business.

The majority of inquiries that Platts receives are addressed and satisfied through explaining the processes that Platts follows in publishing assessments or the methodology used by Platts to assess a particular market. However, sometimes an inquiry escalates into a complaint, which is then recorded and processed through Platts’ complaints management process. Following investigation of a complaint, if a correction to an assessment is deemed necessary, the correction will be made as soon as possible and conveyed to subscribers of Platts’ data.

In accordance with Platts’ Data Management and Security Policy, all business departments maintain a records listing comprising business documents for their departmental area. The records listing includes data ownership and location, security classification, update frequency, and data retention periods. All assessment documentation is retained for a minimum of five years.

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4.5 EDITORIAl SkIllS AnD TRAInIngPlatts operates a global training regime for new and experienced editorial staff involved in the assessment process, ensuring that all staff receive training and development in all aspects of their roles. Training for all oil editorial staff is overseen by Platts’ Editorial Director of Oil Education and Training.

Mandated annual training on Platts’ Editorial Standards is designed to ensure that market reporters take a uniform approach to their work. Tests and training on assessment ability allow Platts’ managers to validate and manage consistency.

Platts operates a single, global hiring test for new editorial staff undertaking core functions of news, market reporting, and the central editing desk. The tests are assessed by trained managers within the editorial function, excluding the ultimate hiring manager. The Human Resources team validates output from the assessments using standardised scoring on a global basis.

Platts has implemented a strategy of planning and charting the back-up for every market reporter which identifies areas of potentially exposed coverage within the team and helps inform the hiring process. The Platts editorial function maintains a hierarchical management structure to provide a succession of roles and career progression within the oil group to develop both the topical and managerial skills of its staff and assure a robust bench of talent at regional and global levels.

Succession planning is undertaken at manager level. Platts creates personalised learning roadmaps for all market reporters and clearly defines mandated formal training together with on-the-job experience that must be completed before progressing within Platts. This enfranchises market reporters and maximises their potential for progression within Platts.

Platts undertakes regular managerial reviews of all market reporters with a frequency determined by experience in the role or a change in circumstance.

4.6 QuAlITy AnD RISk MAnAgEMEnTPlatts maintains a comprehensive set of risk policies, processes, and procedures designed to ensure the business is consistently managed within an agreed framework. Platts’ Quality and Risk Management function is responsible for providing oversight of Platts’ performance against risk and compliance parameters to ensure that risks are managed to an acceptable level and that the business complies with policies, standards, and regulatory requirements.

As part of Platts’ annual compliance program, employees must provide compliance certifications, complete conflict of interest disclosure questionnaires, complete certain training programs, and satisfy other compliance-related requirements.

The Platts Vice President of Quality and Risk Management is responsible for preparing the policies and for reviewing and updating them periodically, but not less than annually. The Platts Oversight Committee is responsible for approving the policies.

Platts’ policies apply to all staff globally. Adhering to policies is mandatory. Any dispensations require formal prior approval.

Platts’ QRM team is responsible for ensuring the policies are implemented, reviewed, and maintained and performance against the policies is monitored and managed. The QRM team is also responsible for managing requests for variations/dispensations.

Platts’ policies include a Conflicts of Interest policy and an Editorial Independence and Commercial Principles policy. Together, they have been designed to ensure that decisions by the editorial department, which conducts price assessment activities, are not influenced by, or perceived to be influenced by, Platts’ commercial interests.

The specific policies and processes maintained by Platts referenced within the IOSCO Principles are detailed below.

Data Management and SecurityPlatts operates a Data Management and Security policy that ensures that business records are properly identified, retained, protected, and disposed of by employees in accordance with their department’s records listing.

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The records listing includes:

� Assigned business owner(s) for each record category in their departmental area

� The data elements that constitute the record

� The security category into which the record is classified

� Who and which groups within the business department are permitted access to the data

� How and where the record is stored

� The process for updating the record (e.g. frequency, awareness and communication, etc.)

� The data retention period

All employees are prohibited from communicating non-public sensitive information on Platts’ business outside of Platts. This restriction includes discussions with non-Platts employees about customers, business strategy, and product development. Employees are trained and advised to avoid displaying confidential information on laptop computers or other written material, and to refrain from verbal discussions in public areas such as elevators, public transportation, and airports. This also applies to the use of electronic communications such as external e-mails and instant messages.

As detailed in Platts’ Editorial Independence and Commercial Principles Policy, all market reporters are forbidden from divulging confidential information, including the names of confidential sources, outside of Platts, except to Platts and McGraw Hill Financial senior management, the Platts Quality and Risk Management team and the McGraw Hill Financial Legal Department as necessary.

Conflicts of InterestPlatts’ Conflicts of Interest Policy has been designed to:

� Clarify the requirements for identifying, preventing, and managing business, personal, and financial conflicts of interest (including handling confidential information), and the provision for giving and receiving gifts;

� Clarify the requirements for managing relationships with third parties, including customers, sources, vendors, business partners, and competitors;

� Ensure the fair treatment of clients and the protection of client interests and Platts’ assets and reputation;

� Ensure that controls are in place to prevent, detect, and manage conflicts of interest that are effective, consistent, and an integral part of day-to-day decisions.

Specifically, Platts’ Conflicts of Interest Policy requires that where Platts employees have personal relationships or personal financial interests which might influence them (or might be perceived as influencing them) in a way that is incompatible with the fair treatment and interests of Platts’ clients, or which could interfere with their ability to perform their job in an objective, impartial and effective manner, they must promptly report the situation to their manager and take steps to remove or manage the personal conflict of interest.

Where personal relationships or financial interests conflict with Platts employees’ duty to Platts, Platts’ interests must come first.

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In relation to personal interests, employees must not:

� Engage in outside activities that conflict, or appear to conflict, with their duties at Platts, nor engage in outside activities that compromise, or create the potential to compromise, their objectivity or judgment;

� Serve on an outside Board of Directors, or as an officer for any outside organization, without first obtaining writ-ten approval from Platts’ President (in the case of the President, approval must be obtained from McGraw Hill Financial);

� In their role as an outside Board Director, vote or participate in discussion on any proposal in which Platts has an interest; or in their role within Platts, vote or participate in discussions or decisions concerning the entity of a Board on which they serve;

� Engage in any outside interests which may interfere with the time or attention which should be devoted to Platts duties, or which could adversely affect the quality of Platts work performed, or use Platts equipment, resources, intellectual capital, or supplies for personal gain or the gain of an immediate family member;

� Be an active member of an organization which lobbies on behalf of the Platts sector industries, or whose activi-ties and objectives are in conflict with those of Platts. Employees are permitted to join journalistic, academic and other organizations subject to the provisions within this policy.

Employees are required to use good judgment in the provision/receipt of gifts and must never request gifts in exchange for business.

Employees may not accept anything that is or reasonably could be interpreted as improperly influencing or rewarding a business decision or transaction or that otherwise creates violations of law, nor can the impression be created that offering gifts is required in order to do business with Platts.

Business-related meals and/or entertainment may be accepted provided that the cost and nature of such meals and entertainment is appropriate, conforms to normal business practice, and is consistent with the monetary limits prescribed in Platts’ Client Entertainment, Meals, and Gifts Policy.

Employees may accept gifts that are not of material value (as defined by Platts and reviewed at least annually) with the following exceptions:

� Incentive-based awards may not be accepted from any third parties with whom Platts conducts business or is considering conducting business;

� Cash/financial substitutes may never be accepted;

� Gifts that are, or could reasonably be construed to be, intended to influence or reward a business decision or transaction may not be accepted. Employees must refuse a gift when Platts is considering proposals or negotiat-ing a contract with the third party offering the gift. Any subsequent gifts that could reasonably be construed as connected to past contractual negotiations must also be refused;

� Employees may not accept gifts that are of material value except for holiday gift baskets containing items such as confections, food, non-alcoholic drinks, and similar items, provided that such holiday baskets are shared with the recipient’s department or office.

� Employees must notify their immediate manager and the Quality and Risk Management team upon receipt of any gift and must complete a gift form.

� All gifts that exceed material value, other than gift baskets, must be returned to the giver with an accompanying letter from the employee, a member of senior management, or the QRM team.

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Travel, expenses, and lodging at an out-of-town event attended by Platts employees must always be paid for by Platts with the following exception:

� If a Platts employee has been asked to speak or moderate a discussion panel at an event, reasonable travel and lodging at an out-of-town event may be accepted if pre-approved, in writing, by the employee’s manager or anoth-er appropriate member of the management team and submitted to the QRM team by completing a pre-approval form.

Editorial Independence and Commercial PrinciplesTo help ensure Platts’ price assessments are free from any actual or perceived conflicts of interest, Platts’ editorial decisions and policies must neither be influenced, nor perceived to be influenced, by Platts’ commercial interests. Consequently, Platts maintains a strict separation between editorial activities and commercial activities. Specifically, employees engaged in editorial activities are prohibited from:

� Decision-making on the price to be charged for subscriptions or access to Platts’ products;

� Decision-making involving the sale of Platts’ products or engaging in the negotiation of commercial contracts, with the exception that editorial employees may participate in sales presentations for the sole purpose of educat-ing customers or prospects about Platts content

� Budgeting or the establishment of specific revenue targets for the sale of Platts’ products and services.

Further, Platts does not evaluate any employee with editorial responsibilities based on the commercial success of any Platts products, with the following exceptions:

� the editorial quality of Platts’ products may be taken into account in evaluations

� employees in editorial may be evaluated based on their responsibility for establishing and maintaining the quality and relevance of Platts’ price assessments

� employees in editorial who are responsible for the Platts MOC process may be evaluated based on the quality of the operation

To reinforce the independence of Platts’ editorial function from commercial interests, personnel within these units must not take direction from employees within the sales and the general management organizations in carrying out their editorial responsibilities.

The following excerpts from the Platts Editorial Independence and Commercial Awareness Policy further supports business processes pertaining to editorial independence:

Publishers, product managers, sales and marketing executives, and the heads of business departments are not to have a direct hand in choosing, generating or directly influencing editorial content intended for publication in print products or distribution online.

In addition, decisions about what to publish day-to-day and the timing of news articles and other content reside strictly with editorial management. Furthermore, those decisions are subject to change at any time, based on news judgement and other journalistic considerations.

Publishers should not make any commitments on behalf of market reporters to cover or write about any subject. Standards such as accuracy, attribution, fairness, and balance that apply in the print environment should prevail as well for editorial content published in digital format on the Platts website and elsewhere on the Internet.

In regard to price reporting, all decisions concerning price methodology and methodology changes fall under the exclusive authority of editorial management. Platts’ market reporting is focused on assessing the value of physical commodities based on structured processes for gathering, observing, and analysing actual market data.

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Platts market reporters are not to engage in personal forecasts, opinions, or predictions of future prices in their reporting, with the exception of commenting in general, directional terms when prompted in appearances before the media or in public forums. At all times, these views should be expressed as personal and not as “Platts’ view” of markets.

Commercial NegotiationsAll employees must exercise care in how they involve themselves in commercial negotiations. Editorial employees are a primary source for the development of new commercial ideas and enhancements to Platts’ products and are encouraged both to recommend ideas for new products and services and to participate in sales presentations to demonstrate commercial products. However, they should not participate in the negotiations of fees for services that take place between Platts’ sales personnel and customers.

Internal controls are in place to ensure that access to editorial systems is confined to members of the editorial team or other authorised personnel.

Complaint ManagementPlatts has a Complaint Management Policy supported with documented procedures that detail how Platts manages the receipt, investigation, and record retention of complaints received from third parties.

Platts’ Complaint Management Policy and process has been designed so that anyone may submit a complaint regarding any issue relating to the services Platts provides. Platts’ Complaint Management Policy defines a complaint as an expression of dissatisfaction with the services provided by Platts, whether received in oral or written form and whether justified or not. Complaints do not comprise inquiries or questions, challenges of assessments or news reports, and requests for information or clarification that are resolved during the normal course of business.

Details of the process are published at http://www.Platts.com.

� Platts will acknowledge all complaints in writing within one (1) business day of receipt.

� Platts will assign an individual to investigate any complaint and determine an appropriate course of action. Any complaint involving an individual or his/her work will be investigated by the next level of management.

� Platts will seek to resolve the complaint as quickly as possible. In most cases, Platts will provide a written re-sponse to the complainant within forty five (45) days from the date of receipt of the complaint by Platts explaining any course of action being taken or recommended by Platts. However, if the scope of the complaint demands investigation beyond forty five (45) days, Platts will write to the complainant explaining why the matter has not been resolved and indicating when a final response is likely to be made.

� A complaint may be referred to McGraw Hill Financial‘s Legal Department where, for example, a complaint al-leges fraud, ethical lapses, libel in Platts publications, restraint of trade, etc.

� If Platts determines that a complaint regarding a specific price assessment is valid, Platts reserves the right to exclude any retroactive price adjustments to price assessments.

� If the complainant does not accept Platts’ determination, Platts will refer the complaint to an appeals process and notify the complainant accordingly in writing within five (5) business days following referral. The specific group to whom the appeal is referred will be determined by the type of complaint and may include Platts’ Quality and Risk Management team, editorial sector heads, Editorial Vice President, Platts’ President or McGraw Hill Financial management, including the McGraw Hill Financial Legal Department as appropriate.

� Platts seeks to complete the appeals process within forty five (45) days from the date of the referral. Once the appeals process has been completed, Platts will notify the complainant of the result in writing within five (5) busi-ness days. However, if the scope of the complaint appeal demands investigation beyond forty five (45) days, Platts

http://www.platts.com/

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will discuss with the relevant appeals group and write to the complainant explaining why the matter has not been resolved and indicating when a final response is likely to be made.

� If a complainant is dissatisfied with the way Platts has handled a complaint, the complainant or Platts may refer the complaint to an independent third party. This referral must occur within six (6) months of the date of the re-ceipt of the original complaint. The current Independent Complaint Reviewer appointed by Platts to handle such referrals can be reached at [email protected].

� The Independent Complaint Reviewer will investigate the complaint and provide a written response to the com-plainant within ninety (90) days of the date of referral.

Platts retains all information pertaining to each complaint for a minimum period of five (5) years.

2 Any communication sent to [email protected] will a utomatically be forwarded to the independent third party engaged by Platts.

mailto:[email protected]

mailto:[email protected]

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SECTION 2

Platts Executives’ Statement

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SECTIoN 2: PLATTS EXECuTIvES’ STATEmENT

ExECuTIvES’ STATEmENTWe are responsible for identification of the control objectives for our business and the design and operation of Platts’ control procedures to effectively address the provisions of the Principles for Oil Price Reporting Agencies (‘PRA Principles’) published by the International Organization of Securities Commissions (IOSCO) on 5th October 2012.

In carrying out those responsibilities, we consider not only the interests of IOSCO but also those of our parent company, McGraw Hill Financial, Inc. We have evaluated the effectiveness of Platts’ control procedures in regard to the PRA Principles.

In our attached report, we set out a description of the relevant frameworks and control procedures together with the related control objectives and PRA Principles which operated as at 30 September 2013 and confirm that:

i) The report describes fairly the control procedures which were in place as at 30 September 2013; and

ii) The control procedures are suitably designed such that the specified control objectives, including the provisions of the PRA Principles, will have been achieved if the described control procedures were complied with satisfactorily.

Signed on behalf of Platts,

Larry Neal, President

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SECTION 3

Independent Assurance Report

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SECTIoN 3: INDEPENDENT ASSURANCE REPoRT

Independent Practitioner’s Assurance Report to the directors of McGraw Hill Financial, Inc. (the ‘Company’) and the executives of Platts, a division of the Company (‘Platts Executives’) in respect of the Company’s response to the IOSCO Principles for Oil Price Reporting Agencies as at 30 September 2013

We have carried out a reasonable assurance engagement in respect of the Platts’ detailed response to the Principles for Oil Price Reporting Agencies published by the International Organization of Securities Commissions (excluding principles 2.2(e), 2.2(f), 2.4(c) and 2.20, the ‘PRA Principles’), in accordance with the terms of our engagement letter dated 15 August 2013. This report covers the description and design of the control procedures related to the application of the methodology criteria (the ‘Platts’ Methodology Framework’) and the compliance with the requirements of the PRA Principles for the benchmarks listed in Section 1 of this report as at 30 September 2013.

This report is made solely to the Company and Platts Executives in connection with principle 2.21 of the PRA Principles. Our work has been undertaken so that we might state to the Company those matters we are required to state in an independent assurance report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the directors of the Company and Platts Executives for our work, for this report, or for the conclusions we have formed, save where expressly agreed in writing.

Respective responsibilities of the Company and the PractitionerThe Company and Platts Executives are responsible for ensuring that the Company and Platts design, implement and monitor compliance with policies and procedures that adhere with the Platts’ Methodology Framework and the PRA Principles. They are also responsible for preparing the statement of adherence to the PRA Principles, set out and supported by the detailed responses to the PRA Principles in Section 4 of this report.

Our responsibilities for this engagement are established in the United Kingdom by our profession’s ethical guidance and are to provide reasonable assurance that in all material respects adherence with the Platts’ Methodology Framework and the PRA Principles have been described fairly and will have been achieved if the described control procedures set out in Section 4 of this report are complied with satisfactorily as at 30 September 2013.

Our approachWe conducted our engagement in accordance with International Standard on Assurance Engagements 3000 issued by the IAASB and with regard to the ICAEW’s draft guidance for commodity price benchmark’s assurance on Price Reporting Agency Principles issued on the 26 June 2013. The criteria against which the control procedures were evaluated are the PRA Principles. Our work was based upon obtaining an understanding of the control procedures as set out in Section 4 of this report and evaluating the Company’s and Platts Executives’ assertions as set out in Section 2 to obtain reasonable assurance so as to form our conclusion. The nature, timing and extent of the procedures we applied and the criteria against which the control procedures were evaluated are detailed in Section 4 of this report.

Inherent limitationsThe validity and reliability of price assessments is dependent on both (i) those who submit information to the PRA, for which submitters are solely responsible, and (ii) the procedures performed by the PRA to analyse that information. Submitters of information are not subject to the PRA Principles and we are unable to comment on the source data submitted by those parties.

Control procedures designed to address specified control objectives are subject to inherent limitations and, accordingly, errors or irregularities may occur and not be detected. Such control procedures cannot guarantee protection against (among other things) fraudulent collusion especially on the part of those holding positions of authority or trust. Furthermore, our conclusion is based on historical information and the projection of any information or conclusions in the attached report to any future periods would be inappropriate.

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SECTIoN 3: INDEPENDENT ASSURANCE REPoRT

ConclusionIn our opinion, in all material respects:

a. the Company’s and Platts Executives’ response to the PRA Principles set out in Section 4 of this report describes fairly the control procedures that relate to the Platts’ Methodology Framework and the PRA Principles which were in place as at 30 September 2013; and

b. the control procedures described in Section 4 of this report are suitably designed such that there is reasonable, but not absolute, assurance that the Platts’ Methodology Framework and the requirements of the PRA Principles will have been achieved if the described control procedures are complied with satisfactorily.

Ernst & Young LLP London

1 November 2013

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SECTION 4

IOSCO Principles for Oil Price Reporting Agencies and Responses

SECTION 4: IOSCO PRINCIPLES FOR OIL PRICE REPORTING AGENCIES AND RESPONSES

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Principle Platts Response EY Response

1.1 A PRA should formalise, document, and make public any methodology that it uses for a price assessment.

Platts’ Methodology and Specification Guides include descriptions of the specifications for the different products for which Platts publishes assessments. These guides also describe the processes and standards Platts adheres to in collecting data, and the methods by which Platts arrives at final assessment values for publication. These guides are available on http://www.platts.com for public review.

Platts’ Methodology and Specifications Guides in scope for the IOSCO Principles for Oil Price Reporting Agencies 5th October 2012 are:

Crude Oil

Americas Refined Oil products



Freight

For each benchmark in scope, we have obtained a copy of the Platts Methodology and Specification Guide that is used for price assessments.

We have confirmed that each Methodology and Specification Guide has been formalized as described in the Platts response and that it has been made publicly available on http://www.platts.com.

1.2 A methodology should aim to achieve price assessments which are reliable indicators of oil market values, free from distortion and representative of the particular market to which they relate.

Platts’ Methodologies, as supported by Platts’ Methodology and Specifications Guides are designed to produce price assessments that are representative of market value of the particular markets to which they relate.

Platts regularly assesses the relevance of methodologies through continuous contact with the market. Platts Methodology Framework and control procedures have been designed to avoid distortion of the final price assessment.

Please also refer to Platts response to Principle 1.3 to 1.6 below.

Review of Methodology and Specification Guides has confirmed that price assessment methodology, process design and control activities in place aim to produce reliable price indicators that are representative of the particular market to which they relate.

See also responses to 1.3 to 1.6 below.



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1.3 At a minimum, a methodology should contain and describe:

a) All criteria and procedures that are used to develop an assessment including how the PRA uses the specific volume, concluded and reported transactions, bids, offers and any other market information (collectively ‘market data’) in its assessment and/or assessment time periods (e.g., windows), why a specific reference unit is used (e.g., barrels of oil), how the PRA collects such market data, the guidelines that control the exercise of judgement by assessors and any other information, such as assumptions, models and/or extrapolation from collected data that are considered in making an assessment;

b) Its procedures and practices that are designed to ensure consistency between its assessors in exercising their judgement;

c) The relative importance that generally will be assigned to each criterion used in forming the price assessment (i.e., type of market data used, type of criterion used to guide judgement). [This is not intended to restrict the specific application of the relevant

a) Platts’ Methodology and Specifications Guide, Part III, Calculating Indices and Making Assessments, provides a detailed account of how Platts collects bids, offers, trades, and other market data, and what Platts does with the data to formulate its indices and assessments. This section explains the reasoning behind reference units used and includes descriptions of how Platts uses specific volumes, concluded and reported transactions, bids, offers, and any other market information it has collected to formulate its price assessments. This section describes how and when judgment is applied in this process, the basis upon which transaction data may be excluded from a price assessment, and the relative importance assigned to each criterion used in forming the price assessment. Guidelines on timings applied in the assessment process are provided in Platts’ Oil Timing and Increment Guidelines, published on http://www.platts.com.

b) Platts operates a global training regime for new and experienced editorial staff involved in the assessment process, ensuring that all staff receive training and development in all aspects of their roles. Mandated annual training on Platts’ Editorial Standards is designed to ensure that market reporters take a uniform approach to their work. Tests and training on assessment ability allow Platts’ managers to validate and manage consistency. Further, Platts undertakes reviews and checks of assessments prior to publication.

c) Platts’ objective is to ensure that the submission of transactional information and other data inputs used to inform price assessments is of the highest quality, as this is crucial to maintaining the integrity of Platts’ price assessment processes.

Platts’ Methodology and Specifications Guide, Part III, Calculating Indices

For each benchmark in scope, we have obtained a copy of the Methodology and Specification Guide and confirmed it is as described within the Platts’ response and includes at a minimum the requirements in principle 1.3.



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methodology but is to ensure the quality and integrity of the price assessment.]

d) Criteria that identify the minimum amount of transaction data (i.e., completed transactions) required for a particular price assessment (the “transaction data threshold”). If no such threshold exists, the reasons why a minimum threshold is not established should be explained, including procedures where there is no transaction data;

e) Criteria that address the assessment periods where the submitted data fall below the methodology’s recommended transaction data threshold or the requisite PRA’s quality standards, including any alternative methods of assessment (e.g., theoretical estimation models). That criteria should explain the procedures used where no transaction data exists;

and Making Assessments, provides a detailed account of the criteria used in forming Platts’ price assessments.

d) Platts’ Methodology and Specifications Guide, Part III, Calculating Indices and Making Assessments, describes the minimum amount of transaction data required for a particular price assessment to be published, as well as the criteria for determining which values are indices and which are assessments, based on reported transactions and other market information.

For Oil, Platts does not specify a minimum amount of transaction data, or a transaction data threshold, for the publication of its price assessments. Physical commodity markets vary in liquidity. Any particular market analysed on its own typically will demonstrate rising and falling levels of transactions through time. Platts is committed to providing an assessment of value for every market that it covers as long as a genuine underlying market continues to exist, equally in times of heightened or reduced liquidity.

e) Platts’ Methodology and Specifications Guide, Part III, Calculating Indices and Making Assessments, defines the treatment Platts applies when limited bid, offer, or transaction data exists as follows:

Platts may consider other verifiable data reported and published through the day, including fully and partially confirmed trades, notional trading values, and other market information as provided for publication. Under such circumstances, Platts also may be able to observe direct market activity or the effect of commonly traded commodities on illiquid markets via spread differentials or via blending and shipping economics. Platts also analyses the relationships between different products and factors these relationships into assessments for markets where transactional data is at low levels. Finally, Platts normalises other available data that may be relevant to


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f) Criteria for timeliness of market data submissions and the means for such submissions (e.g., electronically, via telephone, etc.);

g)Criteria and procedures that address assessment periods where one or more reporting entity submits market data that constitute a significant proportion of the total data upon which the assessment is based (i.e., key submitter dependency). The PRA should also define in its criteria and procedures for what constitutes a “significant proportion” for each price assessment;

the assessment during periods when no or low amounts of transactional data exists, including transactional data from related markets, in the manner described in Platts’ Methodology and Specifications Guides.

f) Platts’ Methodology and Specifications Guide, Part I, Data Quality And Data Submission, describes what goes into Platts’ indices and price values, including details on the data that market participants are expected to submit, the process for submitting data, and criteria for timeliness of market data submissions. This section of Platts’ Methodology and Specifications Guide also defines the reporting methods accepted by Platts for data submissions.

Platts publishes Oil Timing and Increment guidelines with the Methodology and Specifications Guides on http://www.platts.com.

g) As detailed in Part III, Calculating Indices and Making Assessments of each Platts Methodology and Specifications Guides, Platts seeks to receive market information from as broad a cross-section of the market as possible. If a very limited number of market-makers are active in the market, or if a limited number submit data that constitutes a significant proportion of the total data on which the assessment is based, Platts will continue to seek fully transparent and verifiable data from the market at large and to apply Platts’ methodology principles of transparency and time sensitivity. Platts considers data for assessment of any market where a single company provides more than half of all available information to be one where such a company provides a significant proportion of the total data on which the assessment is based. For consideration in the MOC process, such a participant’s bids or offers must be clearly available for execution by any other MOC participant.


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h) Criteria according to which transaction data may be excluded from a price assessment.

h) Platts has processes and controls in place to identify and determine the validity of data used to inform its price assessment process. Any information including bids, offers, and transactions which is inconsistent with or deviates from the Platts methodology or standard market conventions is excluded from informing an assessment.

As part of Platts’ assessment rationale published with each oil assessment that is referenced by the terms of a derivatives contract, Platts publishes four transactional data summaries: (1) a closing summary of all published bids considered during the price assessment process; (2) a closing summary of all published offers considered during the price assessment process; (3) a summary of all published trades considered during the price assessment process ; and (4) a summary of any published data that was excluded from the price assessment process.

The summary of excluded data contains any published data that is inconsistent with the Platts methodology or standard market conventions. Examples of excluded data typically include transactions that are found to have been concluded or reported as a result of an error (such trades typically are unwound between counterparties in the market after an error is discovered). Another example of such data would be bids or offers that contain non-standard terms, and which typically have been noted as being “not for assessment” during the Platts assessment process.


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1.4 A PRA should describe and publish the:

a) Rationale for adopting a particular methodology, including any price adjustment techniques and a justification of why the time period or window within which market data is accepted is a reliable indicator of physical market values;

b) Procedure for internal review and approval of a given methodology, as well as the frequency of this review;

a) Because of the complex nature of the physical oil markets, oil market data must be aligned with standard definitions to allow for a fully representative final published assessment. Platts aligns data collected through an analysis of the physical oil markets with its standard assessment specifications through a process called normalisation.

Normalisation is an essential price adjustment technique applied by Platts to align reported market information to reflect the economic relationship between specific reported activity and the base standard reflected in Platts’ price assessments.

Platts’ Methodology and Specifications Guide, Part III, Calculating Indices and Making Assessments, defines the process of normalisation applied by Platts.

Time cut-offs within a specific market are used primarily by Platts to ensure logistical executability and standards of incrementability and repeatability required in orderly price discovery. Part I, Data Quality and Data Submission, of each Platts Methodology and Specifications Guide defines the application and reasoning supporting time cut-offs applied by Platts.

b) Platts operates a process to ensure that all methodologies are reviewed at least annually. An internal review calendar is maintained recording the next review date for each methodology.

Platts’ Oil Policy Board, which reports to Platts’ Oversight Committee through an Editorial Management Board, is responsible for final approval of methodology changes.

For each benchmark in scope, we have obtained a copy of Methodology and Specification Guide and confirmed that they are as stated in Platts response set out to include the requirements in principle 1.4.

We have confirmed that the requirements of principle 1.4 have been made publicly available at http://www.platts.com.


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c) Procedure for external review of a given methodology, including the procedures to gain market acceptance of the methodology through consultation with stakeholders on important changes to their price assessment processes.

c) Platts follows a clearly defined process for introducing or making changes to its methodologies. This process is based on full transparency and communication with industry stakeholders aimed at gaining market acceptance for any proposed introduction or changes to Platts’ methodology. A summary of procedures adopted by Platts for internal and external methodology reviews is published on http://www.platts.com.

1.5 A PRA should adopt and make public to stakeholders explicit procedures and rationale of any proposed material change in its methodology. Those procedures should be consistent with the overriding objective that a PRA must ensure the continued integrity of its price assessments and implement changes for good order of the particular market to which such changes relate. Such procedures should:

a) Provide advance notice in a clear timeframe that gives stakeholders sufficient opportunity to analyse and comment on the impact of such proposed changes, having regard to the PRA’s assessment of the overall circumstances;

b) Provide for stakeholders’ comments, and the PRA’s response to those comments, to be made accessible to all market stakeholders after any given consultation period, except where the commenter has requested confidentiality.

a) Once Platts identifies the need for a methodology change, Platts publishes a Subscriber Note and invites feedback over a specified time period. The timelines vary depending on the nature of the change. On occasion, Platts may need to respond urgently to changing market conditions and may make an Emergency Change. Such changes are communicated via a Subscriber Note setting out the issue and the specific changes being made to the methodology as a result.

There may be occasions when a Platts assessment ceases to be relevant to the marketplace. Platts will generally provide at least six months’ notice of its intention to discontinue an assessment, although this timeline can be shortened to three months when Platts expects the market impact to be negligible. If an unforeseen event causes a severe disruption in a particular market, the timeline for discontinuing an assessment (sometimes on a temporary basis) may be shortened even further. As with major methodology changes, Platts will communicate a proposal to discontinue an assessment by publishing a Subscriber Note.

b) Any written feedback received by Platts in relation to a methodology consultation that has not been marked as confidential can be made available on request.

We have confirmed that a process for introducing changes to its methodologies have been made publicly available at http://www.platts.com.

For a sample of four major methodology changes (covering each change type) we have obtained a copy of the supporting documentation and confirmed that the requirements of the policies as described in the Platts response have been met and they include the requirements in principle 1.5.



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1.6 A PRA should engage in the routine examination of its methodologies for the purpose of ensuring that they reliably reflect the physical market under assessment. This should include a process for taking into account the views of relevant stakeholders.

Platts operates a process to ensure that all methodologies are reviewed at least annually. A review calendar is maintained recording the next review date for each methodology.

A summary of Platts' procedures for reviewing methodologies is published on http://www.platts.com which highlights that following the proposal for a methodology change, a Subscriber Note is issued and consultative feedback is invited over a specified time period.

After feedback is received and collated, Platts considers information, makes a decision, and issues a Subscriber Note. If Platts decides to proceed with the change, Platts provides additional opportunity for feedback before the change is implemented.

We have obtained a copy of Platts’ defined process for introducing changes to its methodologies and confirmed that it is as stated in Platts response and covers the requirements of principle 1.6.

Routine examination of the Methodology and Specification Guides for each benchmark in scope occurred in August 2013.

The next routine examination is scheduled within a year.

2.1 A PRA should take measures that are intended to ensure the quality and integrity of the price assessment process.

Platts operates a robust, controlled process for the formation of price assessments to ensure assessments are consistent and representative of market value of the particular markets to which they relate.

Platts’ Methodology and Specifications Guides, available on Platts’ website http://www.platts.com, describe the specifications, processes, and standards that Platts adheres to in collecting data and the methods by which Platts arrives at final assessment values for publication.

Platts has internal standards detailing the different processes that its market reporters are required to follow.

Platts operates a global training regime for new and experienced editorial staff involved in the assessment process, ensuring that all staff receive training and development in all aspects of their roles. Mandated annual

See responses to 2.2 to 2.19 below.




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training on Platts’ Editorial Standards is designed to ensure market reporters take a uniform approach to their work. Tests and training on assessment ability allow Platts’ managers to validate and manage consistency.

Further, Platts checks and undertakes reviews of assessments prior to publication.

2.2 A PRA should:

a) Specify with particularity the criteria that define the physical commodity that is the subject of a particular methodology;

b) Utilise its market data, giving priority in the following order, where consistent with the PRA’s approach to ensuring the quality and integrity of a price assessment:

1. Concluded and reported transactions;

2. Bids and offers;

3. Other market information.

Nothing in this provision is intended to restrict a PRA’s flexibility in using market data consistent with its methodologies. However, if

a) Platts’ Methodology and Specifications Guide, Part VII, Definitions of the Trading Locations for Which Platts Publishes Daily Indices or Assessments, provides a list of detailed specifications for the trading locations and products for which Platts publishes indexes or assessments in the specific commodity. The section describes why specific units of measurement are used, and what conversion factors are used to move between units of measurement, where relevant.

b) Platts’ Methodology and Specifications Guide, Part III, Calculating Indices and Making Assessments, contains descriptions of how Platts uses specific volume, concluded and reported transactions, bids, offers, and other market information collected to formulate Platts’ assessments. When determining a final market assessment, Platts gives the greatest priority to fully verifiable and transparent market information.

Firm bids and offers that are available to the entire market take precedence over trades that have been concluded earlier in the assessment process particularly if bids are available at the close above previously traded levels, or offers are available to the market below previously traded levels. Value is a function of time.

Similarly, firm bids and offers that are available to the entire market take

For each benchmark in scope, we have obtained a copy of the Platts Methodology and Specification Guide and other policies and guidelines (including Counterparty Acceptance Policy and guidelines for market data verification and identification of anomalous data) and confirmed that they are as described in the Platts response.

We also confirmed that the policies and guidelines mentioned above include the requirements in principle 2.2 except for 2.2 e. and f. that we were unable to provide reasonable assurance on due to lack of objective criteria we could test against.

We have selected a sample of 37 price assessments across all assessment types and locations and performed a walk through test to confirm the policies and methodology in


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concluded transactions are not given priority, the reasons should be explained as called for in 2.3 (b)

c) Employ sufficient measures designed to use market data submitted and considered in a price assessment, which are bona fide, meaning that the parties submitting the market data have executed, or are prepared to execute, transactions generating such market data and the concluded transactions were executed at arm’s-length from each other. Particular attention should be made in this regard to inter-affiliate transactions;

precedence over transactional activity reported to Platts after the fact. When limited bid, offer, or transaction data exists, Platts may consider other verifiable data reported and published through the day, including fully and partially confirmed trades, notional trading values, and other market information as provided for publication. Under such circumstances, Platts also may be able to observe direct market activity or the effect of commonly traded commodities on illiquid markets via spread differentials or via blending and shipping economics. Platts also analyses the relationships between different products and factors these relationships into assessments for markets where transactional data is at low levels. Finally, Platts normalises other available data that may be relevant to the assessment during periods when no or low amounts of transactional data exists, including transactional data from related markets, as described in Platts’ Methodology and Specifications Guides.

c) Platts’ Methodology and Specifications Guide, Part III, Calculating Indices and Making Assessments, provides a detailed account of how Platts collects bids, offers, trades and other market data and what Platts does with the data to formulate its indices and assessments. Details on data validation, including arm’s-length transactions, also are included in this section of the Methodology and Specifications Guides.

Platts aims to use data of the highest quality and has controls in place to verify that data received is reliable and representative of market value.

Platts operates a Counterparty Acceptance and Review process to ensure that information received from counterparties is in adherence with methodology. Counterparties with appropriate financial and operational resources, such that they can adhere to Platts’ methodology guidelines are eligible to participate in the MOC assessment process.

Occasionally, in an illiquid market, Platts may consider other data to support price discovery. In such cases Platts ensures that information is

the Platts response have been complied with.

For the remaining 42 price assessments (out of 79 benchmarks in scope) we reviewed a sample of one assessment documentation to confirm the policies and methodology in the Platts response have been complied with as at 30 September 2013.


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d) Establish and employ procedures to identify anomalous (i.e., in the context of a PRA’s methodology) or suspicious transaction data and keep records of decisions to exclude transaction data from the PRA’s price assessment process.

verified within the market such that reported executed trades are verified as being executed and that any bids/offers reported are available to the market as a whole. Any data that cannot be verified is eliminated from the assessment process.

In all MOC markets, Platts specifies that transactions reported must be at arm’s length and not conducted between corporate affiliates. Details are maintained within Platts’ editorial department and are available for market reporters to consult. If any questions arise about the affiliation between participating parties, Platts will seek detailed information on relationships for verification before including related data in its price assessment processes.

d) Platts defines anomalous data as any information, including transactions, which is inconsistent with or deviates from Platts’ methodologies or standard market conventions.

Platts’ Methodology and Specifications Guides include descriptions of the methods that Platts uses for reviewing data and for formulating indices and assessments from data inputs, including the procedures used to identify anomalous data.

Platts MOC guidelines have been designed to avoid distortions of the final price assessment such that inputs which are not verifiable or are “one-off” or unrepeatable transactional data may be disregarded from the price assessment process.

Platts has internally published guidelines for market reporters to assist them in identifying anomalous data and highlight the procedures to follow when a market reporter considers an attempt is being made to unduly influence a Platts price assessment such that it would distort the end-of–day assessment value, either through counterparty behaviour or through


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e) Encourage parties that submit any market data (“submitters”) to submit all of their market data that falls within the PRA’s criteria for that assessment. PRAs should seek, so far as they are able and is reasonable, that data submitted are representative of the submitters’ actual concluded transactions.

f) Employ a system of appropriate measures so that, to the extent possible, submitters comply with the PRA’s applicable quality and integrity standards for market data.

the submission of potentially anomalous data.

e) Platts encourages entities that submit any market data for consideration in the assessment process to submit all relevant market data to the assessment being made. This is reiterated in all Platts Methodology and Specifications Guides as well as in the by Platts Counterparty Acceptance and Review process.

Platts MOC guidelines are designed to arrive at final price assessments reflective of market value by eliminating inputs that are not verifiable and by disregarding one-offs or unrepeatable transactions.

f) Platts’ objective is to ensure that the submission of transactional information and other data inputs used to inform price assessments is of the highest quality as this is crucial to maintaining the integrity of Platts’ various price assessment processes.

Platts operates a Counterparty Acceptance and Review process to ensure the integrity of the data used in its assessment processes. Counterparties with appropriate financial and operational resources, such that they can adhere to Platts’ methodology guidelines, are eligible to participate in the MOC assessment process. A prerequisite of the Counterparty Acceptance and Review process is that the counterparty is wholly familiar with Platts’ methodology and can provide verifiable data. If, however, Platts is unable to verify data supplied by the counterparty, data may be excluded from Platts’ price discovery process until Platts can be confident the entity can and will fully adhere to its standards and guidelines.


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2.3 A PRA should describe and publish with each assessment, to the extent reasonable without delaying a price reporting deadline:

a) A concise explanation, sufficient to facilitate a PRA subscriber’s or market authority’s ability to understand how the assessment was developed, including, at a minimum, the size and liquidity of the physical market being assessed (meaning the number and volume of transactions submitted), the range and average volume and range and average of price, and indicative percentages of each type of market data that have been considered in an assessment; terms referring to the pricing methodology should be included (e.g., “transaction-based”, “spread-based” or interpolated/extrapolated”);

a) Platts collects and publishes market data throughout the day in order to create a view on price up until the end of the day, when the assessment is determined.

All Bid, Offer and, Trade information received by Platts in the Platts MOC assessment process as well as indications of bids/ offers still live at the MOC close are published by Platts.

For all oil price assessments that are referenced by the terms of derivative contracts, Platts publishes assessment rationales for price assessments to explain how the assessments have been developed.

Platts assessment commentaries comprise two parts:

Market Analysis, which covers the fundamental market conditions that shape prices by affecting supply and demand.

Assessment Rationale, which explains how the benchmark assessment is derived. The rationale highlights transactions from the MOC that have been used to inform the assessment as well as any transactions that did not conform to Platts’ standards and were therefore excluded. The assessment rationale illustrates any judgments made by market reporters in reaching the price assessment.

Platts does not calculate averages or publish the range and average volume and range and average of price, and indicative percentages of each type of market data because Platts publishes details of all bids offers and trades that have been received during the MOC and lists data that was excluded from the assessment that otherwise conformed to methodology.

For each benchmark within scope, we have selected a sample of one price assessment made in September 2013 and performed the following:

Obtained a copy of Platts Methodology and Specification Guides and Guidelines for Documentation of Price Assessments;

Performed a walk through test to confirm the policies and methodology in the Platts response have been complied with;

Confirmed that the minimum requirements for each methodology and price assessment as set out in the principles in section 2.3 have been included and have been published.


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b) A concise explanation of the extent to which and the basis upon which judgement (e.g., exclusions of data which otherwise conformed to the requirements of the relevant methodology for that assessment, basing prices on spreads or interpolation/extrapolation, or weighting bids or offers higher than concluded transactions etc.), if any, was used in establishing an assessment.

b) Where appropriate, a concise explanation will be included within the published Assessment Rationale to the extent judgment has been used to determine the assessment. Any transactions which otherwise conformed to Platts’ methodology but were excluded from the price assessment are listed.

2.4 A PRA should:

a) Specify the criteria that define who may submit market data to the PRA;

b) Have quality control procedures to evaluate the identity of a submitter and any employee(s) of a submitter who report market data and the authorization of such person(s) to report market data on behalf of a submitter;

a) Platts aim to include data of the highest quality in its prices assessments. Platts’ MOC guidelines are designed to avoid any distortion of the final price assessment; therefore, inputs that are not fully verifiable are eliminated and “one-off or unrepeatable transaction data may be disregarded from the price assessment process. Platts does not validate the identity of submitters but has a number of data validation controls in place to ensure that transactional information and other data inputs used to inform price assessments are of the highest quality described below in the responses to b) and c) below.

b) Platts focus is on the quality of the data provided rather the source of the data. Platts operates a Counterparty Acceptance and Review process to ensure that information received from counterparties is in adherence with methodology.

For an entity to participate in Platts’ price discovery process, it must be approved by Platts through an internal Counterparty Acceptance process. At a minimum, this process requires the counterparty to: be a participant in the market being assessed or a third party through whom principals usually transact;

For each benchmark in scope, we have obtained a copy of the Platts Methodology and Specification Guide and other policies and guidelines (including Counterparty Acceptance Policy and guidelines for market data verification and identification of anomalous data) in respect of the integrity of the reporting process and confirmed that they are as described in the Platts response.

We also confirmed that the policies and guidelines mentioned above include the requirements in principle 2.4 except for 2.4 c. that we were unable to provide reasonable assurance on due to lack of objective criteria we could test against.

We have performed a walk through test for a sample of one price assessment for each benchmark in scope to confirm that the policies and procedures are in place as at 30


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c) Specify the criteria applied to employees of a submitter who are permitted to submit market data to a PRA on behalf of a submitter; encourage submitters to submit transaction data from back office functions and seek corroborating data from other sources where transaction data is received directly from a trader;

possess the operational and financial resources required to be able to adhere to Platts’ methodology;

demonstrate the ability to execute firm trades under typical trading terms with a critical mass of active participants (taking into account the number of active participants, and volumes of trade both overall and for each participant) in the relevant MOC process and a proven track record of doing so; and

demonstrate a good, clear understanding and acceptance of Platts’ methodology and MOC guidelines.

In cases of illiquidity, Platts may additionally consider data from other sources to support the price discovery process. In such cases Platts ensures that information is tested within the market. Trades reported as executed are verified as being executed and Platts ensures that any bids/offers reported are available to the market as a whole. Any data that cannot be verified is eliminated from the assessment process.

c) Platts encourages entities that submit any market data for consideration in the assessment process to submit all market data relevant to the assessment being made. This is reiterated by Platts in all Platts Methodology and Specifications Guides as well as in its Counterparty Acceptance and Review processes.

Platts uses various techniques to confirm the quality of data it receives, including cross checks with counterparties as well as requests for supporting documentation. Platts eliminates data that cannot be verified in the market for its price assessment process.

September 2013.

We have also performed a walk through test for a sample of three instances of counterparty acceptance review and one instance of a counterparty review performed as a result of poor performance that led to temporal suspension in participation in the MOC process.

In order to verify submitted market data, Platts does not reconcile the identities of submitters against the list of submitters authorised to submit market data on behalf of the MOC accepted entities. Instead, Platts perform a set of data verification control procedures as described in the Platts response. The control objective of submitters’ identity validation is to verify submitted data quality. The same control objective is effectively addressed by the control procedures Platts has adopted.


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d) Implement internal controls and written procedures to identify communications between submitters and assessors that attempt to influence an assessment for the benefit of any trading position (whether of the submitter, its employees or any third party), attempt to cause an assessor to violate the PRA's rules or guidelines or identify submitters that engage in a pattern of submitting anomalous or suspicious transaction data. Procedures should include provision for escalation by the PRA of inquiry within the submitter’s company. Controls should include cross-checking market indicators to validate submitted information.

d) Platts defines anomalous data as any information, including transactions, which is inconsistent with or deviates from Platts’ methodologies or standard market conventions.

Platts’ MOC guidelines have been designed to avoid any distortions of the final price assessment such that inputs which are not verifiable or are “one-off” or unrepeatable transactional data may be disregarded from the price assessment process. Platts’ Methodology and Specifications Guides include descriptions of the methods that Platts uses for reviewing data and formulating indices and assessments from data inputs, including the procedures used to identify anomalous data.

If Platts receives information from a counterparty that raises concerns about the suitability of the data for inclusion in a Platts price assessment process, a Counterparty Review may be considered.

The Counterparty Review process has been designed to help ensure that any input used to inform the price assessment process is of the highest quality. Platts’ price assessments would be impaired if counterparties do not meet the Platts’ guidelines for participation.

The Counterparty Review process establishes the participants continued counterparty acceptance, focusing on the ability to execute trades in the specific MOC segment and the participant’s proven ability to meet Platts’ methodology guidelines. Any change in participation status is promptly discussed and communicated with the relevant entity and updated to Platts’ systems internally.

Under certain circumstances, Platts may be necessary to suspend counterparty from participating in an MOC assessment process to protect the integrity of information used in the price discovery process. Instances where such action may be appropriate include, but are not limited to, a bid


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or offer:

being stated incompletely

containing options that mask the intrinsic value of a commodity

specifying delivery outside the date range reflected in the respective Platts methodology

Any decision not to publish trade information from a participant is undertaken through consultation and agreement with senior Platts staff.

Platts informs the relevant editorial staff of any change to counterparty status via email and an internal participation status tool is updated. This tool provides information on counterparty status to the editorial team and is referred to during the assessment process as a quality control to ensure data received and used to inform the price discovery process meets Platts’ guidelines.

Platts has internal guidelines for market reporters to assist them in identifying anomalous data and highlight the procedures to follow when a market reporter considers an attempt is being made to unduly influence a Platts price assessment such that it would distort the end-of-day assessment value, either through counterparty behaviour or through the submission of potentially anomalous data.


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2.5 A PRA should adopt and have explicit internal rules and guidelines for selecting assessors, including their minimum level of training, experience and skills, as well as the process for periodic review of their competence.

Platts operates a single, global hiring test for new editorial staff undertaking core functions of news, market reporting and central editing. The tests are assessed by trained managers within the editorial function, other than the ultimate hiring manager. The Human Resources team validates output from the assessments using standardised scoring on a global basis.

Platts operates a global training regime for all new and experienced editorial staff involved in the assessment process, ensuring that all staff receive training and development in all aspects of their roles. Mandated annual training on Platts’ Editorial Standards maintained by Platts is designed to ensure market reporters take a uniform approach to their work. Tests and training on assessment ability allow Platts’ managers to validate and manage consistency.

Further, Platts undertakes daily managerial checks of assessments prior to publication.

Platts has implemented a strategy of planning and charting the back-up for every market reporter which identifies areas of potentially exposed coverage within the team and helps inform the hiring process. Succession planning is undertaken at manager level. Platts creates personalised learning roadmaps for all market reporters and clearly defines mandated formal training together with on-the-job experience that must be completed before progressing within Platts. This enfranchises market reporters and maximises their potential for progression within Platts.

We have obtained a copy of Platts’ policies and procedures in respect of reporters and assessments and have confirmed that they are as described in the Platts response which includes the requirements in principles 2.5, 2.6 and 2.7.

We have performed walk through tests as set out below:

For a sample of one reporter recruited in the period, we have obtained supporting documentation to confirm the requirements of principle 2.5 have been met.

For a sample of one existing reporter, we have obtained supporting documentation to confirm an on-going periodic review of their competence takes place.

For a sample of twenty price assessments we have confirmed that assessments have been produced on a regular and consistent basis.

We also obtained documentary support to evidence the Platts’ continuity and succession planning in respect of its reporters.

2.6 A PRA should have arrangements to ensure its assessments can be produced on a consistent and regular basis.

2.7 A PRA should maintain continuity and succession planning in respect of its assessors in order to ensure that assessments are made consistently and by employees who possess the relevant levels of expertise.


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2.8 A PRA should institute internal control procedures to ensure the integrity and reliability of assessments. At a minimum, such internal controls and procedures should require:

a) The on-going supervision of individual assessors to ensure that the methodology was properly applied;

b) Procedures for internal sign-off by a supervisor prior to releasing prices for dissemination to the market.

a) Platts operates a training regime for new and experienced editorial staff involved in the assessment process, ensuring that all staff receive training and development in all aspects of their roles. Mandated annual training on Platts’ Editorial Standards is designed to ensure that market reporters take a uniform approach to their work. Tests and training on assessment ability allow Platts’ managers to validate and manage consistency. Platts undertakes regular managerial reviews of all market reporters with a frequency determined by experience in the role or a change in circumstance.

b) Platts operates an established process to check assessments prior to publication. The review ensures that the assessment follows established Platts methodology and that the calculations and logic underlying the assessment are well supported. If the reviewer and the market reporter do not agree on any aspect of the assessment, the matter is escalated to a senior manager for resolution before the assessment is published.

We have obtained a copy of Platts’ policies and procedures and confirmed that they are as described in the Platts response which includes the requirements in principle 2.8.

For a sample of one price assessment for each benchmark in scope we have obtained documentary support to evidence the internal sign off prior to releasing prices to the market.

For a sample of three assessors we have obtained documentary support to evidence the on-going supervision of individual reporters.

2.9 A PRA should have rules and procedures in place to document contemporaneously relevant information, including:

a) All market data;

Platts has documented guidelines covering the assessment process, collection of information, use of judgement, and the documentation required by Platts to validate and support values formulated during the price discovery process. The guidelines also outline the process required for writing and publishing the two different types of commentary — assessment rationale and market analysis — published by Platts for all oil assessments that reference the terms of derivative contracts. The guidelines are designed to be used by Platts market reporters in conjunction with the detailed published descriptions of methodologies for the specific market.

a) Platts collects and publishes market data throughout the day to create a view on price until the end of day, when the assessment is determined. All data informing the assessment must be reflective of market value and verifiable, with bids and offers from named parties being open to the

We have obtained a copy of Platts’ policies and procedures and confirmed that they are as described in the Platts response which includes the requirements in principles 2.9 and 2.10.

For a sample of one price assessment for each benchmark in scope we have obtained the supporting audit trail and confirmed that as at 30 September 2013 it includes the requirements of the principles set out in 2.9.

We have obtained Platts’ records and confirmed that all price assessment related documentation is required to be retained for


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b)The judgements that are made by assessors in reaching each price assessment;

c) Whether an assessment excluded a particular transaction, which otherwise conformed to the requirements of the relevant methodology for that assessment and the rationale for doing so;

d) The identity of each assessor and of any other person who submitted or otherwise generated any of the above information.

market at large.

Platts’ aim is to determine the circumstances surrounding all reported transactional data, including details of quality, specifications, order sizes, dimensions, lead times and any logistical and loading/delivery information. Platts uses this information to determine a typical and repeatable market level for the product being assessed.

b) Platts market reporters follow the relevant methodology when exercising editorial judgement during the assessment process. Platts market reporters apply judgement when determining:

whether information is suitable for publication;

when to apply a technique of data normalisation; and

when determining final value of market

All judgment is subject to review by Platts’ editorial management for adherence to the standards published in Platts’ methodologies.

c) Platts’ assessment rationale supporting oil price assessments that reference the terms of derivatives contracts explains the use of judgment in determining the assessment and documents the data that has been used, the application of any normalisation techniques to data used, and the exclusion of any transactions that otherwise conformed to the requirements of relevant methodology.

d) Platts maintains an assessment spread sheet for all assessments. Required fields include the date of the assessment, the name/s of the market reporter/s, and the name/s of the person/s checking/ approving the details prior to publication. Platts operates a process to regularly check that

at least five years as set out in the Platts response to principle 2.10.


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the spread sheet is being completed correctly.

Platts operates a Data Management and Security Policy that requires all business records are properly identified, retained, protected and disposed of by employees in accordance with their department’s records listing. The records listing includes:

Assigned business owner(s) for each record category in their departmental area

The data elements that constitute the record

The security category into which the record is classified

Who and which groups within the business department are permitted access to the data

How and where the record is stored

The process for updating the record (e.g. frequency, awareness and communication, etc.)

The data retention period

All assessment documentation is retained for a minimum of five years.

Platts has strict filing conventions within the oil sector to ensure that daily assessments and associated documentation are stored consistently on a global basis.

2.10 A PRA should have rules and procedures in place to ensure that an audit trail of relevant information is retained for at least five (5) years in order to document the construction of its assessments.


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2.11 A PRA should document, implement and enforce comprehensive policies and procedures for the identification, disclosure, management and avoidance of conflicts of interest and the protection of integrity and independence of assessments. The policies and procedures should be kept up to date.

McGraw Hill Financial has a Code of Business Ethics supported by policies that set out the standards of behaviour it requires for all employees. Additionally, Platts has a comprehensive set of processes, risk policies, and standards designed to ensure that the business is managed prudently and consistently.

Adhering to policies is mandatory. Any dispensations require formal prior approval.

Platts’ policies include a Conflicts of Interest Policy and an Editorial Independence and Commercial Principles Policy. Together, they have been designed to ensure decisions by the editorial department, which conducts price assessment activities, are not influenced by, or perceived to be influenced by, Platts’ commercial interests. These policies:

Clarify the requirements for identifying, preventing, and managing business, personal, and financial conflicts of interest (including handling confidential information), and the provision for giving and receiving gifts;

Clarify the requirements for managing relationships with third parties, including customers, sources, vendors, business partners, and competitors;

Ensure the fair treatment of clients and the protection of client interests and Platts’ assets and reputation;

Ensure that Platts maintains and manages clear operational and structural separation between price assessment and commercial activities to avoid any actual or perceived conflicts of interest that would damage Platts’ reputation;

Ensure that controls are in place to prevent, detect, and manage

We have obtained a copy of Platts’ policies and procedures in respect of potential conflicts of interest and confirmed that they are consistent with the Platts response and address principles 2.11 and 2.12.

The policies and procedures were last reviewed in November 2012.

We have walked through the Platts’ control procedures, including segregated oversight responsibilities and system access rights, and confirmed they are designed to monitor compliance with the control framework as described in the Platts response.

For a sample of five potential conflicts of interest identified in the attestation process, we have obtained documentary support to evidence the resolution and conclusion of potential conflicts of interest in accordance with the policies and procedures set out in the Platts response.


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conflicts of interest that are effective, consistent, and an integral part of strategic day-to-day decisions.

2.12 At a minimum, those policies and procedures should:

a) Ensure that price assessments are not influenced by the existence of, or potential for, a commercial or personal business relationship or interest between the PRA (or its affiliates), its personnel, clients, any market participant or persons connected with them;

b) Ensure that PRA personnel’s personal interests and business connections are not permitted to compromise the PRA's functions, including outside employment, travel, and acceptance of entertainment, gifts and hospitality provided by PRA clients or other oil market participants;

a) Specifically, Platts’ Conflicts of Interest Policy requires that where Platts employees have personal relationships or personal financial interests which might influence them (or might be perceived as influencing them) in a way that is incompatible with the fair treatment and interests of Platts’ clients or which could interfere with their ability to perform their job in an objective, impartial and effective manner, they must promptly report the situation to their manager and take steps to remove or manage the personal conflicts of interest.

b) Platts’ policies apply to all Platts employees globally. Platts’ Conflicts of Interest Policy requires that where Platts employees have personal relationships or personal financial interests which might influence them (or might be perceived as influencing them) in a way that is incompatible with the fair treatment and interests of Platts’ clients or which could interfere with their ability to perform their job in an objective, impartial and effective manner, they must promptly report the situation to their manager and take steps to remove or manage the personal conflicts of interest.

Where personal relationships or financial interests conflict with Platts employees’ duty to Platts, Platts’ interests must come first.

In relation to personal interests, employees must not:

Engage in outside activities that conflict, or appear to conflict, with their duties at Platts, nor engage in outside activities that compromise, or create the potential to compromise, their objectivity or judgment;


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Serve on an outside Board of Directors, or as an officer for any outside organization without first obtaining written approval from Platts’ President (in the case of the President, approval must be obtained from McGraw Hill Financial);

In their role of an outside Board Director, vote or participate in discussion on any proposal in which Platts has an interest; or in their role within Platts, vote or participate in discussions or decisions concerning the entity of a Board on which they serve;

Engage in any outside interests which may interfere with the time or attention that should be devoted to Platts duties, or which could adversely affect the quality of Platts work performed, or use Platts equipment, resources, intellectual capital, or supplies for personal gain or the gain of an immediate family member;

Be an active member of an organization which lobbies on behalf of the Platts sector industries, or whose activities and objectives are in conflict with those of Platts. Employees are permitted to join journalistic, academic and other organizations subject to the provisions within this policy.

Employees are required to use good judgment in the provision/ receipt of gifts and must never request gifts in exchange for business.

Employees may not accept anything that is or reasonably could be interpreted as improperly influencing or rewarding a business decision or transaction or that otherwise creates violations of law, nor must the impression be created that offering gifts is required in order to do business with Platts.

Business-related meals and/or entertainment may be accepted provided that the cost and nature of such meals and entertainment is appropriate,


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conforms to normal business practice, and is consistent with the monetary limits prescribed in Platts’ Client Entertainment, Meals and Gifts Policy.

Employees may accept gifts that are not of material value (as defined by Platts and reviewed at least annually) with the following exceptions:

Incentive-based awards may not be accepted from any third parties with whom Platts conducts business or is considering conducting business;

Cash/financial substitutes may never be accepted;

Gifts that are, or could reasonably be construed to be, intended to influence or reward a business decision or transaction may not be accepted. Employees must refuse a gift when Platts is considering proposals or negotiating a contract with the third party offering the gift. Any subsequent gifts that could reasonably be construed as connected to past contractual negotiations must also be refused;

Employees may not accept gifts that are of material value except for holiday gift baskets containing items such as confections, food, non-alcoholic drinks, and similar items, provided that such holiday baskets are shared with the recipient’s department or office.

Employees must notify their immediate manager and the Quality and Risk Management team if they receive any gift, and must complete a gift form.

Travel, expenses, and lodging at an out-of-town event attended by Platts employees must always be paid for by Platts except where a Platts employee has been asked to speak or moderate a discussion panel at an event, reasonable travel and lodging at an out-of-town event may be accepted if pre-approved, in writing, by the employee’s manager or alternative and reported to the Quality and Risk Management team through


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c) Ensure, in respect of identified conflicts, appropriate segregation of functions within the PRA by way of supervision, compensation, systems access and information flows.

d) Protect the confidentiality of information submitted to or produced by the PRA, subject to the disclosure obligations of the PRA;

a pre-approval form.

c) Platts maintains clear structural and operational separation between its price assessment activities and other commercial activities to avoid actual or perceived conflicts of interest.

Platts editorial systems have been built with specific user profiles which allow access to be controlled and limited to that part of the system that the user is permitted to access.

Access to Platts’ editorial systems is controlled to prevent inappropriate access to information prior to publication. System access is granted according to the specific role being undertaken following managerial approval. Monthly user access reports are produced and checked by system business owners to ensure only approved users continue to have access rights.

As part of Platts’ annual compliance program employees must provide compliance certifications, complete conflicts disclosure questionnaires, complete certain training programs, and satisfy other compliance-related requirements.

Any requested dispensations require prior executive approval and may be granted subject to conditions imposed by Platts to help ensure the potential conflict of interest is properly managed within Platts.

d) All Platts employees are prohibited from communicating non-public, sensitive information on Platts business outside of Platts. This restriction includes discussions with non-Platts employees about customers, business strategy, and product development. Employees are trained and advised to avoid displaying confidential information on laptop computers, or other written material, and to refrain from verbal discussions in public areas such as elevators, public transportation, and airports. This also applies to the


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e) Prohibit PRA managers, assessors and other employees from contributing to a price assessment by way of engaging in bids, offers and trades on either a personal basis or on behalf of market participants.

f) Effectively address identified conflicts of interest which may exist between its price assessment business (including all staff who perform or otherwise participate in price assessment responsibilities), and any other business of the PRA.

use of electronic communications such as external e-mails and instant messages.

As detailed in Platts’ Editorial Independence and Commercial Principles Policy, all market reporters are forbidden from divulging confidential information, including the names of confidential sources, outside of Platts, except to Platts and McGraw Hill Financial senior management, the Platts Quality and Risk Management team and the McGraw Hill Financial Legal Department as necessary.

e) Platts’ Conflicts of Interest Policy generally prohibits employees from acquiring, owning, controlling, trading, selling, or otherwise possessing a Beneficial Interest (including short sales) in an investment in any company, issuer, or other entity whose businesses lie principally in Platts’ commodity sectors or whose businesses lie in facilitating the trading or transport of commodities in Platts’ sectors.

f) To reinforce the independence of Platts’ editorial department, which performs the price assessment function, Platts maintains a clear, strict separation, structurally and operationally, between its price assessment activities and any commercial activities which could give rise to actual or perceived conflicts of interest. As described in Platts’ Editorial and Commercial Independence Policy, Platts’ editorial employees must not take direction from employees within the Sales and General Management departments in carrying out their editorial responsibilities.

As part of Platts’ annual compliance program, employees must provide compliance certifications, complete conflicts disclosure questionnaires, complete certain training programs, and satisfy other compliance-related requirements.

Any requested dispensations require prior executive approval and may be granted subject to conditions imposed by Platts to help ensure the potential


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conflict of interest is properly managed within Platts.

2.13 There is no principle 2.13 Not applicable.

2.14 A PRA should ensure that its other business operations have in place appropriate procedures and mechanisms designed to minimise the likelihood that conflicts of interest will affect the integrity of price assessments.

Platts’ policies, including Platts’ Conflicts of Interest policy, apply to all staff globally. Adhering to policies is mandatory. Any dispensations require prior formal approval.

Platts’ Quality and Risk Management team conducts annual training to ensure that staff is familiar with Platts’ policies and procedures and to provide the opportunity to raise any questions or concerns they may have.

As part of Platts’ annual compliance program, employees must provide compliance certifications, complete conflicts of interest disclosure questionnaires, complete certain training programs, and satisfy other compliance- related requirements. Any requested dispensations to Platts’ policies require prior executive approval and may be granted subject to conditions imposed by Platts to help ensure the potential conflict of interest is properly managed within Platts.

We have reviewed the Platts’ records of trainings and annual attestations and confirmed that Platts has communicated its policies and procedures to all employees, including its other business operations via training on policy awareness to satisfy the requirements in principle 2.14 as described in the Platts response.


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2.15 A PRA should ensure it has appropriate segregated reporting lines amongst its managers, assessors and other employees (as appropriate) and from the appropriate managers to the PRA’s most senior level management and its Board (if any), designed to ensure (I) the PRA satisfactorily implements the requirements listed in these principles; and (ii) that responsibilities are clearly defined and do not conflict or cause a perception of conflict.

Platts operates through an Executive Committee, chaired by the President of Platts, which is responsible for delivering the strategic goals set by Platts and agreed with McGraw Hill Financial. The Executive Committee comprises senior executive managers within Platts.

Platts’ Executive Committee delegates responsibility for the day-to-day management of Platts to an Oversight Committee chaired by Platts’ President and attended by the Vice President of Editorial, the Vice President of Quality and Risk Management, and a representative from the Legal department of McGraw Hill Financial. Depending on the agenda, other Platts executives may also be required to attend meetings.

Within Platts, responsibility for the implementation of PRA Principles has been delegated to a steering committee chaired jointly by the Vice President of Editorial and the Vice President of Quality and Risk Management.

General managers reporting to President of Platts manage the following vertical business lines within Platts:

Oil

Petrochemicals

Metals and Agriculture

Power

These business verticals are supported with horizontal functional teams. The managers of these functional teams report to the President of Platts:

Editorial

We have obtained a copy of the Editorial Charter and relevant Terms of References and confirmed that Platts has the segregated reporting lines designed to satisfy the requirements in principle 2.15, as described in the Platts response.


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Sales

Finance

Quality and Risk Management

Information Technology

Strategy

Global Trading Services

Legal and Human Resources functions are supported by staff assigned directly from McGraw Hill Financial.

To reinforce the independence of Platts’ Editorial group performing the price assessment function, Platts maintains a clear structurally and operationally separation, between its price assessment activities and commercial activities to avoid actual or perceived conflicts of interest. As described in Platts’ Editorial and Commercial Independence Policy, Platts Editorial employees must not take direction from employees within the Sales and General Management departments in carrying out their editorial responsibilities. In regard to price reporting, all decisions concerning price methodology and methodology changes fall under the exclusive authority of editorial management.

Platts organizes its pricing coverage around the discrete markets being observed. Front-line market reporters will have a specific commodity to assess, but will typically be trained and responsible to provide back-up coverage for another market reporter following a related commodity. Market reporters are managed by a team leader with responsibility for typically less than six direct reports. The team leaders report up through a hierarchy to a managing editor, who reports to a regional editorial director


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and ultimately to a global editorial director for that overall market sector.

2.16 A PRA should disclose to its stakeholders as soon as it becomes aware of a conflict of interest arising from the ownership of the PRA.

The responsibilities of the Platts Oversight Committee’s include the requirement of the committee to consider significant changes of share ownership in McGraw Hill Financial for conflicts of interest with the Platts business and, if these exist, to inform clients where appropriate as soon as practical.

We have reviewed the Platts Oversight Committee Terms of References and other records, and have not identified any conflicts of interest arising from the ownership of Platts that require disclosure to stakeholders.

2.17 A PRA should have in place and publish written procedures for receiving, investigating and retaining records concerning complaints made about a PRA’s assessment process.

Platts has a Complaint Management Policy supported with documented procedures that detail how Platts manages the receipt, investigation, and record retention of complaints received from third parties.

Details of the process are provided on http://www.platts.com.

We have obtained a copy of Platts’ policies and procedures on receiving, investigating and retaining records concerning complaints and confirmed that these have been made publicly available on http://www.platts.com as stated in the Platts response.

2.18 Among other things, such complaint mechanisms should ensure that:

a) A PRA should have in place a mechanism detailed in a written complaints handling policy, by which its subscribers may submit complaints on whether a specific price assessment is representative of market value, proposed price assessment changes, applications of methodology in relation to a specific price assessment and other editorial decisions in relation to price assessment processes;

b) PRA should ensure that its written complaints handling policy includes, among

a) Platts’ Complaint Management Policy and process have been designed so that anyone may submit a complaint regarding any issue relating to the services Platts provides.

Platts’ Complaint Management Policy defines a complaint as an expression of dissatisfaction with the services provided by Platts, whether received in oral or written form and whether justified or not. Complaints do not comprise inquiries or questions, challenges of assessments or news reports, and requests for information or clarification that are resolved during the normal course of business.

The majority of inquiries that Platts receives concerning price assessments are addressed and satisfied through explaining, for example, the processes that Platts follows in publishing assessments or the methodology used by Platts to assess a particular market. However, sometimes an inquiry can evolve into a complaint, in which case it is recorded and processed through

We have obtained a copy of Platts’ Complaint Management Policy and Procedure and confirmed that the policy and procedure include the requirements as set out in the Platts response.

For a sample of three formal complaints received, we have obtained supporting documentation and performed a walk through test to confirm the requirements set out in Platts’ Complaint Management Policy and Procedure are designed to fulfill the requirements of principle 2.18 have been followed.



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other things, the process and target timetable for handling of complaints;

c) Formal complaints made against a PRA and its personnel are investigated by that PRA in a timely and fair manner;

d) The inquiry is conducted independently of any personnel who may be involved in the subject of the complaint;

e) A PRA aims to complete its investigation promptly;

f) A PRA advises the complainant and any other relevant parties of the outcome of the investigation in writing and within a reasonable period;

g) There is recourse to an independent third party appointed by the PRA should a complainant be dissatisfied with the way a complaint has been handled by the relevant PRA or the PRA’s decision in the situation no later than six (6) months from the time of the original complaint;

h) All documents relating to a complaint, including those submitted by the complainant as well as a PRA’s own record, are retained for a minimum of five (5) years.

Platts’ complaint handling process.

In response to b) and c) Platts aims to respond to all complaints in a timely and fair manner. Platts’ complaints handling process is summarised on http://www.platts.com. It defines the process adopted by Platts together with clear timelines for each stage in the process.

d) It is a fundamental principle of the Platts Complaint Management Policy that a complaint involving an individual or his/her work will be investigated by the next level of management.

e) Platts aims to complete investigations relating to complaints in a timely fashion as summarised in the complaint process on http://www.platts.com.

f) As detailed in Platts Complaints Handling Process on http://www.platts.com, Platts aims to communicate in writing the outcome of an investigation to a complainant within five days of the conclusion of an investigation.

g) As detailed in Platts Complaints Handling Process on http://www.platts.com, should a complainant be dissatisfied with the way a complaint has been handled by Platts, within six (6) months from the time of the receipt of the original complaint, the complaint may be referred to an independent third party.

h) Platts’ Complaint Management Policy requires that all records pertaining to a complaint be retained for a minimum of five (5) years.






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2.19 Disputes as to daily pricing determinations, which are not formal complaints, shall be resolved by the PRA with reference to its standard appropriate procedures. If a complaint results in a change in price, that should be communicated to the market as soon as possible.

Platts defines a dispute as an issue arising between counterparties from trades conducted during the MOC process. These are dealt with through Platts’ Counterparty and Review Process. Challenges to price assessments are defined as inquiries.

Platts has documented guidelines for dealing with inquiries or questions; challenges of assessments or news reports; and requests for information or clarification that are resolved during the normal course of business.

An inquiry is defined by Platts as a request for information received in the ordinary course of business regarding methodology, price assessments, market conditions, trade activities, publications, etc. Inquiries also include challenges to price assessments and requests for a review of an assessment. The majority of inquiries that Platts receives are addressed and satisfied through explaining the processes that Platts follows in publishing assessments or the methodology used by Platts to assess a particular market.

However, sometimes an inquiry can evolve into a complaint, in which case it is recorded as such and processed through Platts’ complaints process that is detailed in principle 2.18.Platts has internal guidelines that require corrections to be made as soon as possible after an error has been identified and conveyed to subscribers of Platts’ data. All corrections follow an internal approval process prior to publication.

We have obtained a copy of Platts policies and procedures on disputes, inquiries and corrections processes.

For a sample of three formal complaints, we performed a walk through test to confirm these had been resolved through the standard procedures described in the Platts response in 2.18 above.

As none of complaints led to a price change, for a sample of three price corrections, we performed a walk through test to confirm these had been resolved through the standard procedures described in the Platts response and were published as soon as possible.


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2.20 Audit trails, other documentation required by these principles and all other relevant information shall be readily available to market authorities in carrying out their regulatory duties and handed over without delay in accordance with applicable law.

Subject to any applicable legal or regulatory restrictions or rights or obligations, including relating to Platts’ receipt, use, or disclosure of confidential or otherwise sensitive information, Platts will cooperate with proper and legitimate enquiries or investigations.

Out of scope

2.21 A PRA should appoint an independent, external auditor with appropriate experience and capability to review and report on the PRA’s adherence to its stated methodology criteria and with the requirements of the principles. The first resulting audit should be completed within one year of the publication of the principles by IOSCO and its results published within fifteen months of the publication of the principles. Subsequent audits should take place annually and be published three months after each audit is completed with further interim audits carried out as appropriate.

This principle is covered by this report. This principle is covered by this report.

The design and implementation of Platts’ control procedures …...Americas Refined Oil Products...

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