Regulatory Engagement and Market Issues

The European Benchmarks Regulation (EBMR) aims to address conflicts of interest, governance controls and related issues in the benchmark administration process. While the substantive provisions applicable to S&P Global Platts became effective January 1, 2018, there is a two-year transitional period applicable to existing benchmark providers ending January 1, 2020.

S&P Global Platts has actively engaged with European policymakers and regulators on the EBMR since 2012. As a result of the willingness of European policymakers and regulators to engage in a meaningful way with a wide range of stakeholders during the process, the Regulation takes a calibrated approach. Commodity benchmarks, for example, receive specific treatment under a separate Annex II. The substantive provisions of that Annex are consistent with and heavily influenced by the IOSCO PRA Principles.

S&P Global Platts has adhered to the IOSCO PRA Principles since 2013. This helps to ensure an internationally consistent approach, which minimizes market disruption while meeting regulatory objectives. As part of this, S&P Global Platts will continue to retain an independent audit firm to conduct voluntary reasonable assurance reviews of its alignment to the PRA Principles.

Like other legislation in Europe, and many other jurisdictions around the world, the Benchmark Regulation Level 1 text is supplemented by Level 2 text implementing legislation in the form of Regulatory Technical Standards and Delegated Acts, which further clarifies the requirements of the Regulation.

S&P Global Platts analyzed the Level 1 and Level 2 requirements under the Benchmark Regulation and then commenced an initiative to prepare for implementation. Because the Regulation requires Platts to obtain registration or authorization by an EU National Competent Authority (NCA), Platts has been interacting with EU NCAs to understand their plans to supervise administrators under this new Regulation. We have been actively engaging with the UK's FCA and the AFM in the Netherlands on serval matters including the application process, plans for supervision and the implications of additional factors like Brexit.

We are confident that S&P Global Platts is prepared to be an authorized benchmark administrator under the EBMR and to comply with the Regulation. We do not expect the Regulation to have a material impact on S&P Global Platts ability to provide its price assessments, news and analytics for the global energy and commodity markets.

For more information, including which Platts benchmarks are likely to be in scope at the point of authorization, please contact PL_EBMR@spglobal.com

On September 17, 2015 the International Organization of Securities Commissions (IOSCO) announced that the price reporting agencies (PRAs) have made the IOSCO Oil PRA Principles an "integral part" of their price assessment practices and that IOSCO saw no need to continue its annual review of the Principles' implementation.

IOSCO said: "Given the progress that has been evidenced to date, the commitment by the four main PRAs to continue adhering to the PRA Principles, and to undergo independent external assurance reviews, IOSCO, the IEA, IEF and OPEC do not believe that further annual implementation reviews will be necessary at this time". The full report can be found by clicking this link.

S&P Global Platts remains committed to ensuring its price assessment processes continue to fully align with IOSCO's PRA Principles across all commodities and will continue to retain an independent accountancy firm to conduct voluntary reasonable assurance reviews of its alignment to the PRA Principles.

METHODOLOGY REVIEW

At a minimum, S&P Global Platts reviews all methodologies annually to ensure they continue to reflect the physical markets under assessment. Platts regularly assesses the relevance of methodologies through continuous contact with the market. Feedback on methodologies is always welcomed by Platts. If you have any comments, please contact the Price Group. Please indicate if you wish your comments to remain confidential.

REVIEW & APPROVAL PROCESS

Platts follows a clearly defined process for introducing or making changes to its methodologies. This process is based on full transparency and communication with industry stakeholders aimed at gaining market acceptance for any proposed introduction or changes to methodology.

Once Platts identifies the need for a methodology change:

• Platts assigns an individual as owner of the entire change process. This individual is accountable for ensuring all processes are correctly followed.
• Platts publishes a proposal in the form of a Subscriber Note and invites feedback over a specified time period. The timelines may vary depending on the nature of the change.
• After feedback is received and collated, Platts considers the information, makes a decision and publishes a Subscriber Note. If Platts decides to proceed with the change, Platts provides additional opportunity for feedback before the change is implemented.
• Any written feedback received by Platts in relation to a methodology consultation that has not been designated as confidential will be made available to users upon request.
• Any written feedback on methodologies that has not been marked as confidential can be made available to users upon request

Platts categorizes methodology changes into types. (See table below.) All methodology changes are formally communicated to the market through Subscriber Notes.

Factors, including external factors beyond the control of Platts, may necessitate changes to, or the cessation of, the benchmark. Such factors may include changes in physical market conditions that could materially impact the parameters of an assessment.

Platts does not sponsor, endorse or market any specific financial product or provide investment advice. Users of Platts benchmarks should nevertheless be advised that changes to, or the cessation of, the benchmark may have an impact upon financial instruments that reference the benchmark and users should contact the relevant product provider or fund manager for more information.

Platts is committed to providing advance notice in a clear time frame that gives users sufficient opportunity to analyze and comment on the potential impact of such proposed changes. Time frames vary depending on Platts analysis of the overall circumstances of a particular change.

Methodology changes that materially alter an assessment and require an update to the methodology specification are preceded by extensive bilateral discussions with market stakeholders. Routine changes, such as seasonal quality or pipeline cycle changes, time-rolling assessments, or clarifications, generally do not materially alter an assessment.

Platts may hold open public forums in which material methodology changes and feedback are presented, and at which further feedback may be given.

When a Platts assessment ceases to be relevant to the marketplace, Platts generally will provide at least six months' notice of its intention to discontinue an assessment, although this timeline can be shortened to three months when Platts expects the market impact to be negligible. If an unforeseen event causes a severe disruption in a particular market, the timeline for discontinuing an assessment (sometimes on a temporary basis) may be shortened even further.

On occasion, Platts may need to respond urgently to changing market conditions, perhaps precipitated or warranted by a serious event or market situation. Such changes are also communicated in a Subscriber Note setting out what the issue is and what changes are to be made.

If you wish to comment on a proposed change, please send an email to the address listed in the relevant Subscriber Note and clearly indicate whether you wish your comments to remain confidential.

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