MOC participants must adhere to certain guidelines and protocols which are published in Platts’ methodology documents. These guidelines are rooted in certain principles that maintain the integrity of the MOC process, and thus the quality of Platts’ price assessments.
For instance, the guidelines mandate that the MOC process be fully transparent. Thus, Platts requires full disclosure on the details of any bid, offer or transaction submitted into the MOC process, and does not allow participants to submit bids, offers and transactions anonymously.
Also, Platts requires that the data submitted reflect actual verifiable transactions and/or bids and offers that are “firm,” open to the market at large, and therefore executable. This is to prevent a participant from distorting the process (and thus a Platts assessment) with a bid or offer that is not representative of market value. On occasion, Platts editors will request supporting documentation from the counterparties in order to verify a transaction.
Further, to ensure orderly price formation, participants must follow strict standards regarding increment levels for each change in a bid or offer, and the timing of those changes. This allows potential counterparties sufficient time to act on a bid or offer, and assures that price indications will be tested at each level, mitigating against dramatic and sudden price movements.
For the same reason, Platts requires that companies declare their intention to post bids or offers before a cut-off point in the afternoon, which is 30 to 45 minutes before the close of the market, depending on the commodity. During those final minutes, those buyers and sellers can adjust their prices in line with the Platts incrementability and repeatability guidelines, but new participants cannot post bids and offers. Companies that have not submitted bids or offers, however, may choose to accept a bid or an offer posted through the MOC process. This allows the universe of potential buyers and sellers to be far larger than the number of companies that have posted bids and offers.
There are also MOC guidelines that apply to specific commodities. These guidelines, which are detailed in Platts’ methodology documents and published on www.platts.com, relate to various factors such as product specification, location, cargo size, and delivery terms.
To help ensure the integrity of the price assessment process, Platts maintains the right to exclude companies from the MOC process when they do not adhere to Platts’ methodology protocols and guidelines.