Methodology change for OTC Coal Broker Index

Following feedback from North American coal market participants, Platts will update the methodology for the Platts US OTC Broker Index, effective July 1, to reflect a Market-on-Close methodology utilizing market information from brokers and other market participants.

Price assessment practices have evolved since Platts began publishing the OTC Broker Index in 2003, and this change will bring the OTC Broker Index methodology in line with Platts assessment methodologies for other energy commodities, including other coal assessments it publishes.

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

Under the updated methodology, Platts will 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 will result in consistently formulated assessments that reflect market values at the end of the trading day, defined by Platts as 4 pm Eastern prevailing time for North American coal markets.

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

The updated methodology will apply well-established Platts practices of assessing 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 will 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.

An updated version of the Platts Methodology and Specifications Guide for coal will be posted on Platts.com by July 1 to reflect the change in methodology. The previously separately stated methodology for the OTC Broker Index, on page 9, under "Other Indices and Pricing Data," will be eliminated.

The section describing the methodology for the Platts Daily OTC Assessments, on page 2, will be expanded to make clear that the methodology for the OTC Broker Index will be the same as the Platts Market on Close methodology used for the Platts Daily OTC Assessments.

For additional information, please contact Brian Jordan at brian_jordan@platts.com with a cc to coal@platts.com and to pricegroup@platts.com.