The McGraw-Hill Companies 

plaits COMMENT 

November 4, 2009 

David A. Stawick, Secretary 

Commodity Futures Trading Commission 

Three Lafayette Centre 

1155 21 51 St. NW 

Washington, DC 20581 

secretary@cftc.gov 

Received CFTC 

Re~OJ~.JI Section 

1'fVftJ9 

,_, 

Re: Notice oflntent, Pursuant to the Authority in Section 2(h)(7) of the Commodity ,_ · 

Exchange Act and Commission Rule 36.3(c)(3), to Undertake a Determination Whet~ 

the Fuel Oil-180 Singapore Swap Contract, Offered for Trading on the 

IntercontinentalExchange, Inc., Performs a Significant Price Discovery Function 

Comments of Platts 

Platts, the energy information division of The McGraw-Hill Companies, Inc., submits 

these comments for consideration by the Commodity Futures Trading Commission (the 

"Commission") in proceedings on whether certain contracts offered for trading on 

IntercontinentalExchange, Inc. ("ICE"), an exempt commercial market ("ECM"), are 

significant price discovery contracts within the meaning of Section 2(h)(7) of the 

Commodity Exchange Act because they perform a significant price discovery function. 

Platts has considerable experience and knowledge in assessing prices in a number of 

physical energy markets globally, including the market addressed in this proceeding, and 

is submitting these comments, along with relevant data, in an effort to assist the 

Commission in its review. 

In an October 20, 2009 notice, the Commission sought comment on a swap contract that 

is cash-settled on the arithmetic average of the means between the daily high and low 

price assessments for "HSFO 180 CST'" delivered in the specified calendar month, 

published under the "Singapore" heading within Platts' Asia-Pacific/Arab Gulf 

Marketscan. 

Platts licenses use of its published assessments to ICE for purposes of settlement of the 

contract listed above, as well as others, and thus has an interest in this proceeding. 

Platts publishes its daily Singapore 180 CST fuel oil assessments on a subscription basis. 

The assessment appears in Platts' Asia-Pacific/Arab GulfMarketscan, a daily newsletter, 

and in a variety of other newsletters and real-time news services. In establishing its daily 

180 CST fuel oil assessment, which it has published since 1980, Platts follows a public, 

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well-defined methodology. Platts will summarize elements below. The full methodology 

is available at: 

http://www.platts.com/elqNow/elqNotAuthRedir.htm?ref=/IM.Platts.Content/Methodolo 

gy References/MethodologyS pees/ asiaoilproductspecs. pdf 

Platts' 180 CST assessment reflects transactions, bids and offers for physical cargoes of 

fuel oil of a minimum of20,000 mt, maximum 40,000 mt per transaction, loading in 

Singapore 15-30 days from the date of publication. The assessment reflects the prevailing 

value for a cargo of fuel oil at precisely 16:30:00:99 in Singapore. 

This assessment is arrived at through a Market on Close assessment process, by which 

Platts publishes bids, offers and trades from market participants in real-time, thereby 

promoting market transparency. Market participants are expected to specify loading for a 

five-day date range, a specific price, and any additional terms and conditions at the time 

of providing a bid or offer for publication by Platts. All this information is published by 

Platts in its assessment process in the interest of transparency. 

Under the rules governing Platts' MOC process, all bids and offers are firm from the 

moment of submission and must be open to any reputable and creditworthy counterparty. 

Bids and offers are to be submitted by 16:00:00:99 Singapore time and are not accepted 

thereafter. Platts recognizes only the time of receiving a message of intent to buy/sell, not 

the time it was sent by the trading party. The volume, quality or loading timing cannot be 

changed from 16:00:00:99. However, an onscreen seller or buyer has the right to change 

the price of the offer or bid up to 16:25:00:99. No changes in price can be made 

thereafter. Bids and offers for all products expire at 16:30:00:99 Singapore time. Buyers 

or sellers can withdraw bids/offers at any time provided no prior interest to transact has 

been expressed by any potential counterparty. 

The spot market trades actively on an outright price basis, and as a differential to Platts' 

published assessments. When a cargo is bought or sold on a floating price basis, in 

relation to Platts' published assessments, the premium or discount agreed is typically 

applied to an average of Platts' assessments published during the loading period itself. 

Premiums will usually rise in those times when the market is backwardated (when the 

price for nearby delivery is higher than for further forward months) and the steeper the 

curve, the greater the premium. In a contango situation (when prices are higher for 

forward delivery dates than for nearer delivery dates), premiums will have a tendency to 

turn into discounts. Platts publishes trading activity on a differential and an outright price 

basis. 

Swaps are a significant determinant in the physical price of fuel oil in Singapore, and are 

routinely considered in Platts' assessment systems. Swaps trade freely in an over-thecounter market, and can trade at any time. Paper markets are very reactive, and provide 

market participants with instant feedback on market conditions. Swaps react to arbitrage 

conditions or movements in overseas market, as well as local conditions. 

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These three factors- outright prices, floating prices and swaps- come together in the 

final determination of Platts' published assessment for the value of physical fuel oil 

cargoes loading in Singapore. 

Platts is committed to providing the public with maximum transparency with respect to 

the data that is used in determining Platts' daily price assessments. All bids, offers and 

trades are published throughout the day, and they also appear in transparent daily trade 

summaries published in a variety of Platts publications, including Platts' AsiaPacific/Arab Gulf Marketscan. 

For further information, Platts provides here a summary of the total volume of physical 

180 CST fuel oil trades concluded during its assessment process in recent months, and 

the number of trades done in each month. 

Platts believes that the settlement mechanisms in the contract using physical oil price 

assessments by Platts are appropriate measures of price values at those locations. 

Platts takes no position at this time on whether the ICE contract should be designated as a 

significant price discovery contract under Section 2(h)(7) of the Commodity Exchange 

Act, but we are continuing to review the issues. We believe it is important for the 

Commission, in making its determination, to take note that many of the participants in 

this market conduct no trading activities in the U.S. and the physical fuel oil considered 

in the assessment process is sourced or supplied solely from Singapore. 

Platts would be pleased to answer any additional questions the Commission may have as 

it considers these issues. 

Respectfully submitted, 

By Is! __ _ 

Dave Ernsberger 

Senior Editorial Director, Asia 

Platts 

30 Cecil Street #13-00 

Prudential Tower 

Singapore 049712 

dave_ emsberger@platts.com 

+65 6530 6571 

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