Post WTI rout, BSE modifies system for negative pricing of commodities

April 29 2020

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 In the wake of the WTI crude futures falling below zero last week, the BSE has modified its trading system to allow commodity trading at negative prices.

In a notice, the BSE said that the development is pursuant to recent global movements in the crude oil derivatives markets where trading of futures contracts happened at negative prices owing to various underlying factors.

"It is hereby informed to all Trading Members of Commodity Derivatives segment that Exchange's BOLT Plus trading system has been modified to accept orders and execute trades at negative prices," it said.

It also said that the existing versions of trading system APIs -- ETI as well as IML APIs -- will also support trading activity at negative price levels.

To facilitate testing of this feature in the simulation (test) environment, trading price range of Brent Crude Oil futures contracts shall be suitably updated to accept orders at negative price levels and execute trades, said the exchange.

Trading members and front-end trading application vendors shall be able to place test orders and trade in these contracts at those price levels, it said, adding that this will help members in checking the readiness of their internal systems and make suitable modifications, if any required.

The feature will be enabled in the simulation environment and made available to members and vendors to test from Monday, May 4, onwards.

Further, outlining the benefits on hedging in Brent crude oil for Indian traders and market participants on the bourse, the BSE, in a presentation, described the upgraded feature as a safeguard for Indian market participants.

The development comes after the May delivery contract of West Texas intermediate (WTI) on the NYMEX fell in an unprecedented price movement went below zero dollars on April 20 and shed more than 300 per cent to settle at (-)$37.63 per barrel.

The presentation further said that at BSE, Indian market participants can access global Brent benchmark prices at convenient and cost effective prices.

Brent is the price barometer used by 70 per cent of global crude oil users and the Indian basket of crude oil represents a derived basket comprising of Sour grade (Oman & Dubai average) and Sweet grade (Brent Dated) of crude oil processed in Indian refineries in the ratio of 75.50:24.50.


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  • IANS