Price assessments for over-the-counter (OTC) oil trade and derivatives produced by industry journalists are used to settle billions of dollars worth of deals and to help settle trade on benchmark futures exchanges.

The International Organization of Securities Commissions said there was a risk that reported prices could be manipulated by submission to the agencies from the market of selective or false prices.

Under pressure to curb speculation blamed for huge swings in oil markets, the Group of 20 (G20) top economies last year asked IOSCO to look at the role of price reporting agencies (PRAs). The lead agencies are Platts, owned by McGraw-Hill, and privately-held Argus Media.

IOSCO recommended a range of ideas for physical oil market PRAs, including a possible independent regulator.

"The range of potential approaches to PRA oversight may realistically lie between recommending a form of self regulation to recommending a direct governmental regulatory system," IOSCO said in a consultation report.
 
SAFEGUARDS

Officials at European regulators have said they expect the G20 to adopt some of the options offered by IOSCO when the G20 meets in June in Mexico, and new regulations could be in place within two years.

The IOSCO report said sometimes assessments of oil prices were based on a very small number of trades.

"The number of transactions in certain benchmark assessments can often be less than five and not infrequently there are no prices submitted," the report said.

Oil price reporting agencies now have no external body to ensure oversight of reporting standards, proper levels of transparency or other safeguards, it said.

Journalists at reporting agencies assess prices by calling up as many traders as possible and contacting them via instant messaging to ask where they see the market, trying to avoid pitfalls such as reflecting only one side of the market.

That process has evolved over time and Platts and Argus publish their methodologies detailing how they assess prices.

In some markets, such as the North Sea market which sets the price of global oil benchmark dated Brent, much of the day's deals are done in a 30-minute period known as the "window," aimed at increasing transparency. Even so, many other deals are not captured by the window process.

Argus Media Chairman and Chief Executive Adrian Binks said in a statement Argus had already contributed to a G20 mandated study of independent price reporting organizations:

"We are happy to continue to provide information and work with regulators and the industry to help ensure better understanding of how the physical markets are assessed."

Platts, in a statement, said it shared IOSCO's interest in transparent and efficient markets.

"The oil price reporting process which we have employed for nearly 20 years is a highly structured, transparent process which reports bids, offers and transactions by company of origins," the statement said.

IOSCO has asked for responses to its consultative report from oil companies, banks, PRAs and other participants in the oil market by March 30. Platts said it expected to submit comments to IOSCO.

IOSCO members regulate more than 95 percent of the world's securities markets in more than 100 countries, including the US Securities and Exchange Commission, Britain's Financial Services Authority and Japan's Financial Services Agency.

Thomson Reuters competes with Platts and Argus in providing news and information to the oil markets.