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MCX Enables Technology To Facilitate Negative/Minus Pricing; Adaptation May take Time

25 May 2020 9:35 am
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After last month’s controversial settlement of crude oil contract at a negative price or price quoted in minus, MCX has issued a circular saying that it has now enabled its software-system to quote and trade at negative (minus) price or price below rupee one.

MCX issued circular said, “the revised version of MCX Application Programming Interface (API) to accept negative price in the system. The API has been shared with empanelled vendors and members developing software in-house.”

Now several trading software which brokers are using will have to be updated and tested.

After all trading software are approved mock trading will be done and then trading can happen in negative price. These are front-end software like ODIN or many others.

On April 20, MCX settled crude oil futures Rs 2,884 minus even as their software was not permitting negative price trade. This was because the contract term was to settle it at Nymex crude oil close on the MCX settlement day and Nymex crude which trade in WTI based shale crude oil close minus -$37 per barrel.

After negative price settlement in April, several investors incurred huge losses and large brokerages discontinued trading in crude oil while some increased margins significantly higher for crude oil futures trading. The controversy became bigger and brokers went to high court against the settlement.

Although the cases in the various courts have not been resolved yet, MCX enabled their software to trade negative price. Actual implementation could take longer.

(Commodities Control Bureau)


       
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