Yesterday, the EU raided the offices of BP, Shell and Statoil in a probe over manipulating oil markets.
The European Commission’s antitrust authorities say desks at those firms, along with Platts — the agency that reports some of the benchmarks — may have colluded in reporting distorted prices to manipulate prices “for a number of oil and biofuel products.”
The EC also says they may have prevented others from participating in the price assessment process.
If the investigation is reminiscent of the bust-up of banks who’d manipulated Libor — the international borrowing benchmark rate — it should be.
Last year, the FT’s U.S. banking editor, Tom Braithwaite, published a piece on how easily other standardized pricing rates that were determined by reported trades could be rigged.
All you needed to do was figure out the “max bull&*^t number.” He explains:
Paul Atha, a former natural gas trader for Mirant Corp , deserves the credit for coining it. In a recorded phone call in 2000, Atha described the biggest lie he thought he could get away with in reporting trades as the “max bullshit number” (MBN), according to a complaint by the US Commodity Futures Trading Commission, which was eventually settled.
Like the Libor submitters, Atha and other traders were accused of trying to influence industry prices by reporting false trades…Mr Atha reported to someone like me.
Some years ago I worked for a company that publishes commodity prices. I would phone gas traders who would give me a list of trades. I would enter them in a spreadsheet that spat out a magic benchmark.
If regulators wanted to find other Libor-like manipulation schemes, they needed only target other markets “MBNs” were being used.
With yesterday’s raids, Braithwaite Tweeted earlier today, it looks like authorities have officially caught on.