Voice broker Prebon is to submit its trade records to IntercontinentalExchange’s (Ice) market data platform in a move the two companies say will boost price transparency in the energy markets.
Under the agreement, New Jersey-based Prebon will submit its trades to Ice’s trade confirmation platform, eConfirm. Data from the confirmation system is fed into the indexes and forward curve prices of the 10x Group, Ice’s market data subsidiary. Prebon is the first voice broker to team up with the Atlanta-based commodity trading platform in this way.
“This unambiguous method of collecting market data will allow the benchmark pricing mechanism to move closer to the trade execution venues, with digital confirmations removing subjectivity from the process,” said Jeffrey Sprecher, chief executive of Ice, in a statement released to announce the partnership on February 19.
Ice says 28 companies use its eConfirm service, and those companies have confirmed more than 75,000 trades through 49 different brokers.
The move was welcomed by Craig Goodman, president of the National Energy Marketers Association, a Washington, DC-based trade body. “It has become obvious that the development and implementation of a generally accepted, neutral, standardised, creditable, transparent and auditable valuation tool is key to solving the post-Enron liquidity crises,” he says.
“A credible index will also help standardise the marking of short- and long-term markets, where historically there may not have been enough transactional data and liquidity to systematically verify a settlement price,” adds Goodman.
Ice launched the 10x Group in 2002 as part of its push into market data services. The exchange has been pushing the platform as an alternative source of price information to the traditional price indexes collated by industry publishers such as Platts. The integrity of such indexes has been questioned, following revelations last year that some traders provided false price information in order to improve their own positions.
Ice’s Sprecher said: “We believe many trading firms have become uncomfortable with the prospect of circulating the entirety of their proprietary investment positions to journalists, who have the role of reporting on factors that influence the value of these investments.”
The 10x Group’s market data is based on trades on the Ice system. “The depth and objectivity of these indexes should substantially improve the integrity of the North American energy market benchmarks upon which billions of dollars of transactions rely,” said Martin Wadhwani, managing director of 10x, in a statement to mark the Prebon agreement.
The 10x Group plans to launch new indexes and mark-to-market services in the near future, he added.
The week on Risk.net, August 19-25, 2016Receive this by email