The methodologies used by the PRAs to collect and aggregate prices vary considerably. For example, some PRAs apply largely subjective approaches based on the trading experience of their reporters; other agencies rely almost entirely on mechanical approaches based on consummated transactions or estimates directly observed in the market or submitted by traders.
Our experience includes:
- Evaluating trading data and positions to assess allegations of strategic misreporting of trade data to PRAs in order to benefit market positions.
- Analyzing purported trading strategies and objectives to evaluate whether actual trading activity is consistent with stated objectives and economic rationale.
- Reviewing chat room discussions, instant messages, emails, phone recordings, and other forms of communications to analyze trading conduct, price reports, and benchmark outcomes.
- Analyzing data from both physical and relevant financial markets, such as whether observed quantities and qualities of the commodity at issue are in line with the underlying contract and reported quantities and qualities.
- Evaluating the allegedly impacted benchmark relative to alternative rate or price measures to develop an understanding of the expected benchmark level but for the alleged misconduct.
- Utilizing available datasets to formulate and quantify alleged ill-gotten gains and damages exposures for financial institutions and trading firms.
Interest Rate Benchmark Investigations and Civil Litigation
In interest rate benchmark cases (e.g., LIBOR, Euribor, SIBOR, TIBOR, BBSW) we have evaluated allegations of antitrust violations and market manipulation. Cornerstone Research has assessed submitted rates relative to alternative measures of rates. We have analyzed chat room comments and other forms of communications, conducted statistical analyses of the factors affecting submitted rates, and examined whether deviations generated by statistical models are consistent with relevant communications.
Crude Oil and Associated Products
Cornerstone Research was retained to assess allegations of misreporting to PRAs in propane, butane, naphtha, and associated products. The analysis involved evaluating other market participants’ trading activity, quality and quantity of the products, location and shipping terms, and price movements.
In natural gas price misreporting investigations, Cornerstone Research has analyzed company and market data to determine the number and characteristics of trades made by the company, whether these trades might have been considered reportable at the time they were made, and whether these trades or the related market conditions were accurately represented in reports to PRAs. We also conducted detailed analysis of company, desk, and trader positions to analyze the potential incentives or disincentives to misreport trade prices.