What does it mean to be a ‘data submitter’ and contribute to Fastmarkets’ price discovery?

Fastmarkets’ price reporters collect and analyse data from across the metals and mining value chain on a daily basis.

Our price assessments and indices - many of which are written into physical contracts or form the basis for settlement on exchanges - rely on data contributed directly by the companies active in the buying and selling of the products that we price.

As an independent price reporting agency (PRA), our aim is to provide transparency that facilitates trading in the markets we cover through representative prices. For us, that means holding and handling confidential and commercially sensitive data; for those using Fastmarkets’ prices or otherwise exposed to market fluctuations, it raises questions of how their data can and should be submitted, how others do so and the impact that data can have on published prices.

Fastmarkets’ data submitter policy outlines the commitment those companies and individuals contributing to our price discovery make. Just as our price reporters abide by a code of conduct, the policy contains the guidelines that data submitters are expected to follow. Below, we look in more depth at what that means as well as what the relationship between the submitter and the PRA looks like in practice.

What is the benefit to me and my company in submitting price data?
Fair, robust and representative price assessments benefit both sides of the market, allowing for greater efficiency in negotiations and helping to facilitate long-term partnerships.

At a day-to-day level, the more data a price reporter for consideration in their assessment, the more critically they can think about the data that has been contributed as a whole and the better they can understand a market’s trend. Greater data submission means a broader sample on which to set the price, which means a price that incorporates more market activity and is more reflective of the market as a whole.

In instances where a party later has questions about why and how a price was determined, conversations about the price-discovery process have more depth when that party has contributed to those prices. Over time, the benefit is in having the voice of your company reflected in the pricing mechanism that is, or could be, written into your contract and affecting your bottom line.

Should I have “permission” from my own compliance or legal team, or another part of my organisation, to share my data with you?
We expect that data submitters taking part in the pricing process are authorised and qualified to report market data on behalf of their business. Individual companies will have different views on what that entails, however. It is common for companies to go a step further than simply giving individuals the authority to share information with a PRA - a compliance or legal department might provide guidance on how to report market information to a price reporter as well as outline the extent to which that conversation can extend beyond the pure sharing of data points.

Central guidance in this way is not a realistic or practical expectation in all cases. Ultimately, it is up to the company in question to determine what level of guidance or training they feel is suitable, with the PRA’s data submitter policy in mind. On our side, we can aid that determination by discussing what the price-discovery process entails and the value of the information that we are trying to gather.

How do I know my contributed information is being considered within a sufficient pool of other data?
We aim to bring transparency to markets where there is otherwise limited visibility or pricing data. In some cases we will provide trade logs or comprehensive rationales to bring colour to our price assessments and data pools. Our pricing database (called MInD) also gives us the capacity to provide insight on the number of contributors or the volume of contributions to a specific price if requested.

More generally, our published prices depend on data submissions from a representative cross-section of the market. We align our price discovery with IOSCO principles for PRAs, which include regular reviews to make sure that is the case. Inherently, there is a need to show no dependency on a single or a few data submitters as well as coverage of both the buy and sell sides of the market. One party should not account for 50% or more of the collected data points during a given pricing session; we carry out market engagement and specification reviews to ensure we capture as much data as possible.

Companies might sometimes ask us to demonstrate that their data does not account for more than a certain percentage of the overall data pool. We can extract data from MInD to demonstrate this if necessary.

Markets sometimes change to such an extent that there are fewer active parties, making it more likely that one party accounts for a substantial portion of the data set. In such cases, changes to individual price specifications might be proposed to ensure they reflect typical trading conditions in the relevant market and to allow for broadest potential for data collection.

What is the difference if I report data directly to the price reporter, or routinely via a back-office function, perhaps under a data submitter agreement?
Price reporters give data the same consideration whether submitted by a back-office functions, via DSAs, or by front-office staff directly involved in commercial activity. DSAs mean submission typically happens in a more routine or formulaic fashion, which can make the price-discovery process more time-efficient. Direct reporting to a price reporter, often on the phone, tends to allow for more background information and context to the reported deals. In any case, we expect all data submitters to do contribute in a regular and consistent fashion.

DSAs set the level of confidentiality with which data is treated. Typical data submission protects the data submitter and his or her company (i.e. a specific company’s commercial activity will not be shared in a way by which the source can be reasonably be expected to be identified). Where a DSA is in place, the data itself is protected too (i.e. it cannot be shared nor reported but only used for the price assessment).

As above, the preferred method is to be determined by the company concerned but we can contribute to those discussions to help facilitate contributions where there is an interest in doing so.

Is data treated differently if reported by a large, diversified trading house versus a smaller, privately owned market participant?
Our methodology is aligned to actual transactions, giving them more weight in the price-assessment or indexing process. So the distinction is made more in terms of the value and utility of data point than size of company.

New data submitters, whether from a large or small company, go through the same process of internal approval at Fastmarkets when they start to contribute information.

Our price reporters have a primary focus on one or a few related markets, meaning they will develop an expertise in those markets as well as a thorough understanding of the key participants and their relative size in the market. Their relative size can differ from the size of the same company in the commodity markets as a whole.

What does the price reporter know about my business and the market I work in? What is their interest in accepting my data?
Price reporters receive market training before starting to price a market, which they will then do alongside the guidance and mentoring of a team member with an in-depth and working knowledge of how those markets operate. Reporters are required to engage with the market outside their regular pricing calls through visits and attendance at industry events.

Our alignment with the IOSCO standards for PRAs includes a two-stage sign-off process before prices are published. This means that senior members of the editorial team, who also have a solid working knowledge the relevant markets, including price trends, key participants and market structure/dynamics, will be involved in the price publication. In the absence of a primary reporter, markets are allocated to a regular back-up reporter who maintains a working knowledge of those markets through market engagement, news writing and cross training.

A new entrant suddenly starts reporting data - does it immediately start to influence the price?
We welcome contributions from new parties to broaden the pool of data but new data submitters are not automatically given “approved” status on our internal database. Over a maximum period of three months, a reporter will monitor the data contributions from a new party and will endeavour to find out more about their position in the market before asking a senior member of the team to approve that contact for regular data submissions. Before requesting sign-off, the reporter must show that the party is active in the relevant market and that he or she has considered its position and how it might affect contributions. The reporter is also asked whether the new data submitter has been providing representative data for that market.

It would be reasonable for a price reporter to view data submissions from a new party with caution, and exercise care and explanation of judgement before moving a price solely on the basis of such contributions.

What level of detail am I expected to go into when reporting my trades - does sharing more compromise confidentiality?
To understand all parameters that might affect a price, our reporters try to get as much detail as possible about trades or other market activity. We publish detailed specifications - relating to inco terms, delivery windows and chemical specifications, for example - for each price we publish. Reporters ask questions to ensure that the data submitted meets these base specifications. Where relevant and possible, they will ask questions about normalisation to base point. Submitters should be willing and prepared to disclose such information.

Intricate details such as these aid the price-discovery process and ensure all relevant details are given due consideration during the assessment process. We appreciate that some details or commercial terms will expose market players; our reporters will therefore ask how that data point should be referred to in market reports, trade logs, rationales and the like although the finer details will be considered in the price assessment or index.

To ensure confidentiality, data can be subject to confidentiality requests or referred to in market reporting with no mention of specific details.

All supplementary details to data points are stored in MInD, access to which is reviewed regularly and restricted to authorised members of the editorial team, management and database administrators.

If I provide more details about our trade, or provide information more frequently, does that guarantee that data being reflected in the price assessment?
This helps the reporter to make a more informed judgement within their price assessment but it does not guarantee the price range incorporating that number or an impact on the index calculation.

Indices include automatic outlier filters. In an assessment, all data points are given consideration but a particular deal might not be reflected in the ultimate assessment where non-market factors are present - or reasonably suspected to be present given where other market activity has taken place.

Although each data point contributes to raising our understanding of the market and gauging the market trend, data submitters share their information in the understanding that outliers do exist. Non-market factors - such as a one-off sale to a poorly connected customer or a small, suspected sacrificial sale - can put the price of a deal higher or lower than it would otherwise have been, even if all other elements of that trade meet the base specification.

Does a data contributor have to provide documentary proof of each purchase or sale?
No - but, as above, a company might decide to provide such evidence each time a purchase or sale is executed. A reporter might request a signed contract or other proof as part of their efforts to confirm that a trade has taken place but could still ultimately determine that that trade was an outlier. The prices we publish are intended to be representative of where business has taken place or realistically would have done so over a given period. This does not include incorporating or reflecting every single bit of market data that has been submitted to the price discovery process, however.

Is it possible for somebody to selectively provide data - merely reporting the parts of their book that would influence the price discovery process to their greater overall benefit?
A submitter has the responsibility to be transparent - we expect that data contributors to share all relevant market data with the relevant reporter without topping or tailing or being selective.

We make every effort to match up trades with buyers and sellers; as markets become more transparent, the ability of companies to cherry-pick information becomes harder. Our prices and data are also contributed to and relied upon by public companies; should that data be found to be reported in a misleading or selective way, the greater risk or loss outweighs the short-term potential upside.

We ask for complete data. Our reporters attempt to ascertain whether that information is correct by cross-checking; we also ask the market to play its part in ensuring that representative and independently assessed prices for the markets that they are involved in are available through Fastmarkets.

And what if you suspect a breach of the data submitter policy by the submitter?
We make sure we’re speaking to buyers and sellers. We also try to match up deals where we can. If we suspect someone is withholding information, or have grounds to believe their data undermines the robustness of our prices, we will question the contributor and make a judgement on the value of their data. Fastmarkets may subsequently deem someone a less reliable source and no longer consider their data to be as reliable - they will ultimately lose the ability to be part of the process of determining a price that their business relies on.

We seek to keep the dialogue open but we have ultimately inform them that we will no longer considered their data in a price assessment or the index to which it relates. Data submitters will be reminded to familiarise themselves with the data submitter policy on an annual basis

I have contracts based on one of your prices and I contribute the relevant data to that assessment. Should I contribute data for prices that cover other markets I’m active in as well, even if I’m not doing business based on those quotes?
We look to engage with anybody who is active in the markets we are pricing. We are always trying to widen the pool of contributors but we appreciate that in practice a company may take the view that it contributes solely to prices that it writes into contracts. Markets evolve; we develop and refine our prices with that in mind. We look for strong data sets that make for prices that are viable physical benchmarks - as well as references - as soon as the market deems that a requirement. At the same time, the provision of data to multiple PRAs ensures healthy competition and price optionality - it can help to keep benchmarks robust.

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