We examine the Dated Brent benchmark published by the leading oil price reporting agency, Platts. We find informed anticipatory trading in the Brent futures market during the physical oil price fixing period (16:00 to 16:30 London time). We document enhanced levels of trading volume, trade size and volatility for Brent futures and show significant abnormal returns, in the order of magnitude of 27 bps, realisable by informed futures traders during the 30-minute price fixing window. Results thus suggest that information leaks from the Dated Brent fixing into the futures market, allowing informed traders to front-run the crude oil market. Our findings inform policy makers on the influence of unregulated physical commodity price benchmarks on regulated exchange-traded financial derivatives.
|Number of pages||77|
|Publication status||Unpublished - 14 Jan 2016|