The IPE has noted the further efforts of market participants to develop more liquid alternatives to the 15 day Brent market for forward trading. In particular, the Exchange has noted that partial and spread trades have recently been reported on a 20 and 21 day basis, with the option to substitute Forties and Oseberg. However, these trades have been confined to aftermarket activity which does not provide a basis for intra-day assessment and, as yet, no cargo trades have been reported.
As a Recognised Investment Exchange, the IPE's regulatory responsibilities include maintaining a strong relationship between the underlying market and the IPE expiry mechanism. In respect of the IPE Brent Index, rule L.4 allows for the Exchange in its absolute discretion to replace 15 day Brent with cash prices from another market, having regard to market circumstances. Therefore the IPE would expect to change the trades and assessments included in the IPE Brent Index should a new dominant trade type for forward Brent emerge.
The IPE would only implement such a change to the IPE Brent Index calculation provided there are reported cargo trades and intra-day assessments of the same contract type that are verifiable and transparent.
Any change to the types of trade included in the IPE Brent Index will not involve a concomitant change to the IPE expiration calendar. Any need to amend expiration dates will remain under review, until such time as an established forward trading pattern has become clear. In the event that the IPE makes a decision to amend the expiration calendar, in accordance with the rules for changing expiration dates for traded options on the IPE, the market will be given a minimum of 6 months notice of such a change.
As the IPE would not wish to implement any change in the IPE Brent Index within a week of an expiry date, the Exchange confirms that the existing calculation methodology based on 15 day Brent will be used for the IPE Brent Index for the September contract expiry on 15 August 2002.
