Platts proposes changes to OTC Broker Index July 1

Platts is proposing to change the methodology for its US OTC Broker Index, effective July 1, 2011.

Price assessment practices have evolved since Platts began publishing the OTC Broker Index in 2003 and under this proposal the methodology would be updated to bring it in line with Platts' assessment methodologies of other energy commodities, including other coal assessments it publishes.

The OTC Broker Index would continue to include information from currently participating brokers -- Evolution Markets, ICAP United and TFS Energy. But rather than simply averaging the assessments submitted by brokers to formulate the final assessments as under the current methodology, Platts also will take into its consideration transactions and bid and offer information provided by brokers and other market participants.

Under the updated methodology, Platts would publish the OTC Broker Index assessments using the same systematic Market on Close practices and techniques it has used since 2001 to assess forward electricity markets and since 2003 to assess forward natural gas markets. The application of these well-established practices would result in consistently formulated assessments that reflect market values at the end of the trading day, defined by Platts as 4 p.m. Eastern prevailing time for North American coal markets.

All information from credible sources would be aggregated into a single data set for analysis. Transactions, bid and offers, and other market information -- including market data submitted by brokers -- would be compared and analyzed. While all available information on trading activity that occurs throughout the day would be considered, bids and offers made and transactions done would be analyzed in relation to time of day to formulate values at the end of the trading day.

The updated methodology would apply well-established Platts practices to assess standard products and time periods for which there is little or no trading activity on a given day. In those cases, in addition to making use of any transactional data or other information such as submissions by brokers, editors would assess using current spread relationships among standard products and time periods, based on analyses of day-to-day changes in those spread relationships.

Brokers have been vital to the development of the US over-the-counter coal trading market and continue to play an important role in facilitating the market. Much trading of US standardized OTC coal products occurs through brokers, and the Platts OTC Broker Index, under the updated methodology, will continue to reflect that trading activity.

Please submit comments and questions by May 9 to Brian Jordan at brian_jordan@platts.com with a cc to coal@platts.com and to pricegroup@platts.com.