So what the Hell is going on with Lehman's commodities desk? In the wee hours of the morning Lehman was shut out of a key energy trading window. Platts, the energy pricing company, suspended Lehman from its oil pricing window in Singapore for unknown reasons. The move will reportedly make it impossible for Lehman to trade certain oil contracts. And it all seems to be about Lehman's credit worthiness.
We've now independently confirmed the story which began as a whisper among traders and was first reported on by Reuters. Platts has placed Lehman "under review," which is essentially their penalty box for traders. A source who declined to be named told Reuters that Lehman has been suspended because of credit issues. A source familiar with today's events confirms to DealBreaker that credit worthiness was at the heart of the suspension.
Top executives at Platts have been concerned about Lehman's credit worthiness for weeks, the source said. As credit default swaps insuring Lehman's debt have climbed sharply, the top brass at Platts became increasingly concerned about Lehman, according to the source.
It's also possible that Platts executives might have more than evidence of the swaps to worry about Lehman. Reuters tip-toes around the fact that Platts is a subsidiary of McGraw-Hill, which also owns the debt rating agency Standard & Poors. There's a pretty sturdy "Chinese-wall" between S&P and Platts but information has been occasionally rumored to slip through the cracks.
Platts has also been known to put traders in the penalty box for lesser infractions, including not closing deals it bid on of offered, not following the bidding protocol or trying to game the system in some underhanded way. There's no evidence that Lehman fell afoul of any of these no-nos.
Neither Platts nor Lehman were immediately available for comment on this story.
Platts review bars Lehman from key oil trade window [Reuters]
Posted by guest, Jul 07, 2008 2:45PM
Well fuck.
-Nominate me
/hates counterparty risk