PRIMA DISCOVERY description
A digital, transparent, orderly price assessment for OTC commodities
- PRIMA Discovery runs digital assessment sessions in select OTC commodities
- Each session displays a current assessment at all times
- PRIMA price assessments are open to market challenge
- All price entries are on standardized terms
- Market order maintained algorithmically as qualifying inputs change assessment.
- Assessment session automatically extends to avoid closing price stampedes
- PRIMA publishes its closing price assessment after verifying close of session
- Full session transcript available for immediate review
PRIMA Discovery price assessments cover select over the counter (OTC) commodities markets. All assessments conform to a standardized quantity, period and specification. The full timing, location, and quality specification methodology for each individual assessment is shown on the PRIMA Discovery platform with a full PRIMA methodology permanently available for review as a pdf at www.prima-markets.com.
Bids, offers, or trades which fail to meet the precise PRIMA specification will not be considered towards the assessment and can’t enter the system.
Qualified participants can view PRIMA Discovery sessions in real time. Other observers will be subject to a five minute delay in watching sessions.
For each market to be assessed, PRIMA appoints a start time for each applicable business day.
Each assessment session starts with a display of the PRIMA Opening Assessment. This is the level which PRIMA, through the work of its assessment team, believes to be appropriate for the product. This level is then open to transparent challenge by qualifying market participants through the PRIMA Discovery platform.
Qualifying registered participants are invited to enter their interest to buy or sell product on the exact terms quoted directly, tagging an intermediary broker or via an intermediary broker entering the interest directly. These entries announce the participant’s intention to be bound to the entered price level according to the exact contractual terms outlined by the assessment methodology.
PRIMA is willing to engage with any trading or brokerage firm meeting its business practice standards, which will reflect the best business practice standards of the wider market.
Where participants enter bids above or offers below the initial PRIMA Opening Assessment, an algorithm will alter the PRIMA assessment automatically and immediately update the electronically displayed PRIMA price assessment for the market to see. All prices entered are clearly visible to market participants and any other interested party.
Input prices are required to be delivered within a strict range linked to the current price through algorithms defined by the starting price and the recent market volatility of the product being assessed. This range will move up and down as the assessed price changes. The range ensures order in the market and protects participants from manifest error in price entry. Speed breakers are used to manage price inputs to ensure that the market remains orderly.
Where one participant enters a bid price and another participant an offer price at the same level, the details will register at the brokerage firm or firms assisting with the order flow. If the brokerage firm, or firms, close a deal between the two participants it will register on the screen.
If a matched price can’t trade due to credit or other counterparty limitations, both prices will remain live on the screen.
All PRIMA price assessment sessions will operate for a minimum of 10 minutes. At the end of a typical ten minute session, provided no new assessment changing input has been received in the final 30 seconds, the session will end and the PRIMA price assessment on the screen at the time of conclusion will be the Final Assessment price for the day, subject to review by PRIMA.
In the event of a price being received that alters the PRIMA assessed price in the final 30 seconds of a session, the session will be extended for an additional 30 seconds. This process will continue for up to another 3 hours if prices continue to be input which move the assessed price. After a total of 3 hours 10 minutes a price received in the final 20 seconds will extend the session by 30 seconds. This will remain for a further 50 minutes until there has been a continuous 20 second period of price constancy. At the end of 4 hours a session can be further extended by the PRIMA price assessment team if they feel market conditions warrant an extension. If not, PRIMA will end the session and make the Final Assessment based on the activity at the close of the session.
By allowing the assessment period to extend in the event of a last 30 or 20 second price change, the PRIMA price assessment removes one of the key flaws in assessment models which set a fixed un-adjustable end time, encouraging a disorderly last minute stampede to register interests.
Each session is electronically recorded in its entirety, allowing users to replay the whole session from start to finish and remain available for retrospective historical analysis. This facility eliminates the challenge of collating and re-engineering past session histories for compliance purposes from telephone, IM and email records. The disaggregation of recorded assessment inputs across separate email, instant message, and written transcripts of unrecorded telephone conversations necessarily robs any compliance overview of the overarching market context and narrative of each individual session, as well as running the risk that scattered inputs are invariably overlooked, lost, or worst of all ignored.
The PRIMA price assessment methodology delivers the following unique qualities:
1) A permanently displayed price assessment
From the start of the assessment session, the live PRIMA price assessment is available for all to see. This will bring genuine price transparency to a price formation function long-used to opacity over its input sources.
2) Algorithmically controlled price assessment
Market order can be assured through the algorithmically controlled applicable price ranges and assessment movements which govern each assessment session.
3) Extending price assessment period
By allowing the assessment time period to extend in the event of continuing active interest, an important incentive for price manipulation is removed and the public can be assured of an orderly market and assessment.
4) A fully recorded session history for each published price
PRIMA’s is the only price assessment methodology which can fully recreate the sequence of any session or series of sessions without any risk of input omission. This approach has been specifically designed to meet the full requirements of compliance authorities regarding the oversight of benchmark formation as outlined in the IOSCO principles for PRAs.
US Patent pending.