Last Updated: December 2019
The Principles for Oil Price Reporting Agencies ('PRA Principles'), as published by the International Organization of Securities Commissions (IOSCO) on 5th October 2012, encouraged PRAs to implement the PRA Principles to any assessment of any commodity that is used to reference the terms of a derivative contract. In response to the PRA Principles, all Spark Commodities ('Spark') assessments have been designed to align to the required Principles.
This documentation outlines our Governance procedures and we are constantly looking to improve on how we develop in this area.
Organisation and Business:
Spark has a robust governance structure in place to ensure the business is conducted responsibly, effectively, and with due regard for all stakeholders' interests.
Neither Spark nor its shareholders participate in the markets Spark assesses. Independence, neutrality and impartiality are central to the work Spark does. Spark has no financial interest in the price of the products or commodities on which it reports. Spark's aim is to reflect market value.
Spark methodologies are designed to clearly describe:
- The specifications of the commodity Spark is assessing.
- The way that Spark collects relevant assessments.
- How these assessments are used to create the relevant Spark Price.
- Develop methodologies that reflect physical market practice and in line with market requirements.
- Produce reliable, fair, data-driven and representative price assessments.
- Provide mechanisms to prevent and limit market manipulation.
- Provide greater levels of transparency for illiquid markets by providing an increased amount of anonymised, relevant data.
- Avoid selective reporting where possible whilst recognising industry dynamics and lack of liquidity.
Existing Spark Contracts which align to IOSCO principles for Price Reporting Agencies:
- Spark30S (Spot)
- Spark30F (Front Month)
- Spark30Fo (Forwards)
- Spark30S (Spot)
- Spark30F (Front Month)
- Spark30Fo (Forwards)
Spark methodologies are designed to produce price assessments that are representative of market value of the particular markets to which they relate and are available for review on the website..
3 step process to Spark contract creation:
- Market Engagement and Contract Design: extensive conversations/meetings with market participants and brokers to assess demand and preferred contract specifications.
- Contract Testing:
- Release of contract for testing with brokers: feedback received and contract refined where needed.
- Release of contract for market acceptance testing in form of trial period.
- Contract Implementation: launch of contract after completion of contract testing phase with all contract specifics made available to all users via the platform.
Who can submit data?
All data submitted to Spark is divided into 2 separate
- Spark Price Assessment Data (broker only)
- Market Data
- Only brokers form part of the Spark Price Assessment to ensure neutrality.
- Market Data is data received from market participants who are active in the LNG freight market. This ensures that only relevant data is provided adding further transparency to the market. New users must go through the onboarding process and will not eligible to submit data unless verified by Spark.
- The verification process shall determine the role of the user within the LNG Freight market and rights to contribute to any assessments.
Spark manages a strict permission system for users of the platform. Access to the information on the platform is restricted by permission rights.
What are the requirements for Brokers to contribute and how does Spark ensure they reflect the market?
- All new Brokers must be nominated by at least 2 market participants in order to contribute to the Spark Price assessment.
- Brokers must be actively involved in the spot market and must demonstrate this.
- A survey will be carried out with all Spark users every 12 months allowing the market to challenge the involvement of any brokers or suggesting the addition of new brokers.
Price Assessments and Data:
Spark Methodology Documentation:
Spark Methodology documentation is available on the website. It describes the specifications and processes that Spark adheres to in collecting data and the methods Spark uses to calculate assessments from its data inputs.
How do we assess Spark prices and how can I submit?
- Anonymised price assessments against a standardised methodology received from a wide range of relevant market participants and brokers during the assessment windows. Please see separate LNG Freight Methodology document for window details.
- Prices can only be submitted when the assessment windows are open.
- Only Broker assessments form part of the Spark Price assessment. Market player submissions help to better understand the range of views and allow for benchmarking and validation of Broker assessments.
- Unless for specific reasons, price assessments can only be submitted via the platform to allow for a more robust auditing system where required.
Verification of Submitted data:
- Static range in place to limit unrepresentative assessments. Limits can only be passed if submitters acknowledge that is outside of the expected norms. These 'exceptions' will be clearly recorded and are fully auditable. This is supported by a hard range. Spark shall make the ranges clear on the relevant Spark Methodology available on both the platform and website.
- Randomised checks on data entry.
- Each submitter's data will be fully auditable for compliance purposes if required by law or by a relevant company representative (e.g Compliance Officer).
- Verification of submitter profile and role within market prior to having submission access.
Order of importance for collated data informing the Spark Price Assessment:
Broker assessments will be primarily be based on the following types of data (in descending order of importance). However price assessments will take into account the lack of standardisation and current lack of liquidity in the LNG freight market.
- Concluded Transactions
- Bids and Offers (currently being tested via reported/confirmed assessment feature)
- Other Market Information
- Provide full range of data submissions (min/max/average) to those that submit.
- Remove human bias and subjective decision making where possible.
- Provide comparative data for similar contracts if applicable.
- Provide clarity on number of submitters for price assessments.
- All inputs are fully auditable where required.
Corrections to assessments:
Spark will on occasion publish corrections to price assessments after the publication date. These errors may arise from clerical mistakes or miscalculation errors amongst other things. Spark will not allow retrospective submissions after the price assessment window has closed.
Ethics and compliance:
- Secure and fully auditable data trials.
- Protected anonymity.
- Data-driven price publication.
- All Spark employees must confirm (annually) that they have no personal or financial conflicts of interest that may limit or be perceived to limit their ability to perform their role in an objective, fair and effective manner.
Review of methodology:
- Regular, annual review process for all Spark methodologies to ensure compatibility with market requirements consisting of:
- Data reviews
- Market player discussions
- Annual survey of Spark users
- Any market player or submitter can highlight concerns to email@example.com.
- Any findings shall be clearly documented with the rationale for change clearly stated.
Changes to methodology:
Spark follows a clear 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 change to methodology.
- All changes must be clearly explained along with the corresponding rationale.
- Clear consultation period for the market to assess and review suggested changes. Multiple opportunities will be given to the market players to comment and feedback on any proposed changes.
- Publication of changes and comments surrounding such changes.
- Any consultation period will have a clearly defined duration and will depend on the nature of the change.
- The proposed implementation period, if applicable, will be clearly communicated and within reasonable timeframes.
There may be occasions when a Spark assessment ceases to be relevant to the marketplace. Where possible, Spark will provide at least 120 days' notice of its intention to discontinue an assessment. 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. Spark will communicate a proposal to discontinue an assessment by formally writing to all users.
Skills and Training:
Spark hires suitable candidates from a broad range of backgrounds. All employees go through an onboarding process to ensure that they have a thorough and adequate understanding of Spark business processes and procedures.
At the beginning of each calendar year, all Spark employees must complete conflict of interest disclosure questionnaires and satisfy other compliance-related requirements.
The Complaints Procedure has been designed so that anyone may submit a complaint regarding any issue relating to the services Spark provides. Details of the process are highlighted below:
- Although we try to be as transparent and clear as possible, any Spark users can raise any concerns or complaints by sending an email to firstname.lastname@example.org. Spark commits to responding within 5 business days and will investigate accordingly. Investigation findings will be shared within 30 business days. If the User is dissatisfied with Spark's handling of the complaint, then they may contact an independent third party.
- The information relating to the concern or complaint shall be kept on fill for future review where required.
- Spark retains all information pertaining to each complaint for a minimum period of five (5) years.
Data Security and Confidentiality:
- All our data is hosted with Google Cloud Platform who are compliant with industry best practice. Spark follows their recommendations regarding data security.
- All Spark employees are prohibited from communicating non-public, sensitive information on Spark business outside of Spark. This restriction includes discussions with non-Spark employees about customers, business strategy and product development. Employees are advised to avoid displaying confidential information on laptop computers or other written material, and to refrain from verbal discussions in public areas such as elevators, public transportation, and airports. This also applies to the use of electronic communications such as external emails and instant messages. All Spark employees are forbidden from divulging confidential information, including the names of confidential sources, outside of Spark, unless required by law.
- All relevant information relating to the price assessment will be retained for a minimum of five (5) years. This shall include any exclusions of data.
- Spark intends to have an annual independent external audit to ensure compliance with IOSCO principles and our stated methodology.
- Spark agrees to share data with the relevant authorities and regulators where required by law.
Alignment with IOSCO Principles:
Our methodology, governance process and data policies are aligned to IOSCO principles. Please find the link to the relevant IOSCO principles below:
|Version||Date of Revision||Description of Changes|
5th December 2019
Addition and clarification on the following topics: