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Why Exchanges Create Local Oil Price Markers

Article Quant Q&A · Author: Decipher
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Summary

The document explains why an exchange might introduce an oil futures marker tied to a particular region and time of day. Such a marker can provide an independent reference price that better matches local trading hours; the example notes that the standard Brent settlement occurs during the night in Singapore. The marker may then be used as a reference in over-the-counter derivatives or physical supply contracts.

If market participants adopt the marker, they may need to trade around its assessment time to hedge exposures, creating trading activity for the exchange. A second response gives a simpler commercial explanation: exchanges introduce markers when they expect enough demand to make them profitable. The text describes the intended incentives but provides no data on adoption, liquidity, price accuracy, or realized exchange revenues, so it does not establish whether a particular marker succeeded.

Key ideas

  • A local marker can provide a reference price aligned with the relevant market's trading hours.
  • Participants may reference the marker in OTC derivatives or physical supply contracts.
  • Adoption can create hedging activity around the marker's assessment time.
  • An exchange may introduce a marker when it expects sufficient demand and commercial return.

Tags

CommoditiesFuturesMarket microstructure
Full text
# ICE oil Future Markers


# ICE oil Future Markers












i have seen Brent oil future singapore marker many times. however, i wonder what is the reason for introducing different markers in the future market.

FYI - LINK

## Answer by gavbrennan (score 2)

https://quant.stackexchange.com/a/37298

The exchange hopes that people will reference their new markers as the referenced price index in OTC derivative contracts or in physical supply contracts - the idea being that the marker provides an independent and fair assessment of the market at a point in the day relevant to the local market (2:30pm NYC time when ICE Brent settles is the middle of the night in Singapore).

If the marker does start to be referenced, it will generate business for the exchange as people need to trade in the market at the time of assessment to hedge themselves.

## Answer by Bram (score 1)

https://quant.stackexchange.com/a/15061

Because exchanges believe there is enough demand for market participants to generate meaningful profits for them.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.