Source: Wall Street News
Author: Ying Yiru
Glencore, one of the protagonists who participated in the “epic” Nickel War at the beginning of the year, has made headlines again recently.
Glencore admitted to conspiring between 2011 and 2019 to manipulate fuel benchmarks set by price reporting agency S&P Global Platts, which allowed it to artificially reduce costs and boost profits, according to media reports.
Glencore has pleaded guilty to the charges and agreed to pay a total fine of up to $1.5 billion.
“Glencore’s manipulation of market prices may not only cause financial damage, but may also undermine participants’ confidence in the fairness and efficiency of commodity markets,” U.S. Attorney Vanessa Roberts Avery said in announcing the settlement on Tuesday.
How is Glencore manipulated?
On Tuesday, the UK’s Serious Fraud Office (SFO) charged Glencore British Energy, a subsidiary of Glencore Group, with seven for-profit oil operations in Cameroon, Equatorial Guinea, Côte d’Ivoire, Nigeria and South Sudan. Purpose of bribery and corruption cases.
The raw materials giant agreed this week to plead guilty to rigging fuel assessment prices. During the benchmarking process, price recorders survey traders in the market for bids, bids and trades .
This is a very important part of futures trading, billions of dollars in physical transactions are set against a daily benchmark, which is also the reference price for a large number of derivatives. However, they are usually based on relatively few transactions, which can allow large trading houses to manipulate the physical market to benefit their derivatives positions.
Details of the allegations against Glencore show how much the company could gain or lose by reporting false information to pricing agencies.
In a 2012 case cited by the U.S. Commodity Futures Trading Commission (CFTC), Glencore’s average daily position in Platts’ U.S. Gulf Coast high-sulfur fuel oil benchmark exceeded 8.8 million barrels in November, enough to fill four more than one supertanker.
During this period, Glencore traders reported 728 bids and raises to Platts and 59 purchases of goods with the intent to “manipulate” daily benchmark prices and swaps and price-referenced settlements. Derivatives such as futures.
In July 2018, Glencore traders held more than 4 million barrels short of the same benchmark, driving Platts lower prices by reporting low prices in the pricing window.
Corrupt dealings under investigation
S&P Global Platts said in a statement that it maintains a “robust, rigorous and transparent approach” that enables it to “publish assessments that reflect market value,” and that any manipulation of its processes has not occurred. success. But Glencore Chief Executive Gary Nagle said the company admitted wrongdoing in its partnership with S&P Global Platts.
The CFTC said Tuesday that Glencore was involved in corruption and market manipulation from at least 2007 to 2018, with the firm’s traders using terms such as “newspaper” and “chocolate” to refer to corrupt payments.
Glencore said in February that it had set aside $1.5 billion in reserves to resolve multinational investigations.
Still, $1.5 billion is paltry for Glencore. Glencore is expected to post a profit of more than $17 billion this year, thanks to soaring commodity prices, according to analysts’ estimates.
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