Voluntary IOSCO Statement
Pexapark’s Alignment with the IOSCO principles for Financial Benchmarks
Pexapark develops, calculates and publishes PPA prices reflecting the fair, neutral and market representative value of renewable electricity under a PPA. Pexapark’s reference prices are produced daily using Pexapark’s proprietary pricing model, which is regularly calibrated based on all available market price evidence collected by Pexapark.
While Pexapark is recognized as the leading provider of PPA reference prices in the market, it is not subject to the EU Benchmark Regulation, and aims to meet the Principles for Financial Benchmarks published by the International Organization of Securities Commissions (“IOSCO”) in July 2013 (“Principles”) on a voluntary basis, striving to meet the highest standards in terms of the accuracy, integrity and reliability of the data it publishes.
As such, we confirm to the best of our knowledge that Pexapark complies with the Principles. Where appropriate, the application of these Principles is proportional to the size and risks posed by Pexapark.
1. Governance (Principles 1-5) Principles
Pexapark assumes primary responsibility for all aspects of its PPA reference prices process, including the development, determination and dissemination of PPA Benchmark prices. Pexapark’s Methodology Board (its composition is documented in the Methodology Document) has established credible and transparent governance, oversight and accountability procedures and ensures appropriate transparency.
The day-to-day production of the PPA reference prices is the remit of Pexapark’s Editorial & Quant Methodology Teams, which are overseen by the Methodology Board. The Methodology Board meets in an established meeting cadence to perform its oversight functions, such as periodically reviewing the definition and methodology of PPA reference prices, and reviewing and approving material changes to the benchmark methodology.
Pexapark has implemented an appropriate control framework for the process of determining and distributing the Benchmark. In addition, Pexapark takes reasonable steps to avoid undue operational risks, including the maintenance of a Business Continuity Plan, which is regularly reviewed. Pexapark does not use third parties to calculate its reference prices. However, where Pexapark makes use of activities relating to the Benchmark determination process which are undertaken by third parties (e.g. data storage or collection providers), it maintains appropriate oversight of such parties.
In order to ensure transparency, Pexapark has created a comprehensive Methodology Document, which describes how its PPA reference prices are determined. The Methodology Document can be requested here.
Regarding Conflict of Interest, Pexapark has adopted and implemented, among others, policies that ensure the integrity and independence of Pexapark’s Benchmark determinations by providing for the identification, disclosure, management, mitigation, and avoidance of actual or potential conflicts of interest, notably:
- Strict separation of Benchmarking and Front Office activities: Pexapark maintains reporting lines strictly separated, and has divided its operating business into three separate divisions which work independently from each other. The Benchmarking unit is led and managed by experienced and highly qualified employees to ensure the quality of the Benchmark, and their performance is regularly reviewed. Pexapark has implemented Chinese Walls between Front Office Personnel and personnel involved in Benchmarking, to control information exchange between staff.
- Confidential information: Confidentiality of data submissions by Submitters (Monthly PPA Price Poll) is contractually guaranteed.
- Pexapark’s remuneration policies ensure that all personnel involved in the reference price determination process do not have performance goals or bonus arrangements that are incentivized by the levels of the reference prices.
Furthermore, conflicts of interests arising due to ownership structure can be excluded, as Pexapark is an independent company which operates fully independent of its Shareholders.
2. Quality of Benchmarks (Principles 1-5)
Pexapark’s methodology is based on an accurate representation of the underlying PPA market, and it is dynamics, which are in addition regularly reviewed and validation.
To date, active PPA markets exists but price transparency is low due to the low number of transactions, the overthe-counter (OTC) nature of PPAs, infrequent disclosure of transacted prices, the heterogeneity of deal structures and non-standardization of PPA contracts. Through the use of a quantitative modelling framework and supported by price evidence Pexapark creates daily reference prices which are fair, independent, neutral, transparent, and market representative indicators of the value of renewable energy under PPAs.
To maintain the high quality of its reference prices, Pexapark uses market data from exchanges (e.g. futures prices) as well as market-observed PPA price data from a number of different sources, such as transaction prices, executable (“firm”) offers as well as indicative bids and offers through it Monthly PPA Price Poll. Pexapark’s methodology documents clearly the data inputs, data verification and normalization, as well the data hierarchy that is applied to ensure an accurate and consistent benchmark.
With regards to the underlying data used for its reference prices, Pexapark’s methodology documents the data inputs, data verification and normalization, as well the data hierarchy that is applied to ensure an accurate and consistent benchmark.
Pexapark maintains various controls and procedures designed to identify abnormal or erroneous inputs for such data, which are documented in its Methodology Document. Specifically regarding the market-observed PPA price data (e.g. the data from the Monthly PPA Price Poll), Pexapark’s Editorial Team rigorously verifies the accuracy and reliability of the data they receive, cross-checking price data from multiple sources to ensure consistency and removing outliers using the Standard Deviation as described in the Methodology Document, Pexapark carefully scrutinizes all price data for internal consistency, potential errors or biases. and for attempts to intentionally bias the benchmark. Editorial judgment can be applied at the discretion of the Editorial & Quant Methodology Teams, whose actions are in each case reviewed by the Methodology Board.
3. Accountability (Principles 16-19)
In order to detect any misconduct or irregularities that may arise, Pexapark has established an effective complaints handling mechanism via its website. Any stakeholder wishing to make a complaint can use the firm’s complaints procedure that is clear and easy to understand, and Pexapark has established procedures which outline the specific responsibilities for addressing and responding to these complaints. Pexapark keeps the records of the relevant items for at least five years.
Pexapark maintains suitable records of its administration of the reference prices, in compliance with the Principles.