Day Trading Stocks & Futures
- Thread starter TraderRavi
- Start date
- Tags banknifty bnf daytrading nifty future
Crude fiasco at MCX has brokers staring at a loss of ₹435 crore
Settlement of crude oil contracts at the Multi Commodity Exchange (MCX) suffered a double whammy on Tuesday. One was the unprecedented crisis in international markets, where prices turned negative. The exchange also failed to arrive at a settlement price for its contract ended on 20 April. The two factors combined to have brokers staring at an estimated loss of ₹435 crore.
MCX relies on the Nymex (New York Mercantile Exchange) rates for pricing its crude oil contracts. The May futures on the New York exchange had settled at an unprecedented negative rate: Minus $37.63 a barrel. However, the Indian commodity exchange had to provisionally settle the contracts during the early hours of Tuesday at ₹1.
This is perhaps the first time since the 1980s when such a call or provisional pricing was implemented. The provisional pricing has also resulted in concerns about whether it could lead to an artificial settlement price. However, by evening the exchange released the final settlement price of minus ₹2,884 per barrel in line with global prices.
“Due to the unprecedented price fluctuation in the international crude oil markets, the due rate for crude oil futures contract expiring on April 20, 2020, is under finalisation. In the interim, the provisional settlement price for April 20, 2020, is considered as ₹1 per barrel for the computation of members’ obligation for trade date April 20, 2020. The differential settlement, if any, on fixation of the final settlement price shall be done subsequently," said a circular issued by MCX.
The biggest reason for the settlement fiasco was the reduced market hours. On 27 March, bourses had announced a reduction in commodity trading hours till 5pm. Crude oil prices fell at Nymex between 5pm and 11.30pm, India time on Monday and as trading was shut in India during those hours, many brokers could not get out of contracts.
This also affected MCX’s ability to calculate correct settlement prices. The debacle then forced the exchange to revert to regular trade timings of 11.30pm for globally-referenced non-agri commodities.
“This is a settlement disaster and is based on poor contract design, considering you cannot trade between the end of day in India till the contract is settled in the US. Under current rules, buyers of the contracts will have to pay large sums for a negative settlement price in a cash-settlement, but the settlement price of ₹1 was temporarily arrived at," said Deepak Shenoy, founder and CEO, Capitalmind Wealth.
https://www.livemint.com/market/sto...n-crude-settlement-at-mcx-11587482582760.html
Settlement of crude oil contracts at the Multi Commodity Exchange (MCX) suffered a double whammy on Tuesday. One was the unprecedented crisis in international markets, where prices turned negative. The exchange also failed to arrive at a settlement price for its contract ended on 20 April. The two factors combined to have brokers staring at an estimated loss of ₹435 crore.
MCX relies on the Nymex (New York Mercantile Exchange) rates for pricing its crude oil contracts. The May futures on the New York exchange had settled at an unprecedented negative rate: Minus $37.63 a barrel. However, the Indian commodity exchange had to provisionally settle the contracts during the early hours of Tuesday at ₹1.
This is perhaps the first time since the 1980s when such a call or provisional pricing was implemented. The provisional pricing has also resulted in concerns about whether it could lead to an artificial settlement price. However, by evening the exchange released the final settlement price of minus ₹2,884 per barrel in line with global prices.
“Due to the unprecedented price fluctuation in the international crude oil markets, the due rate for crude oil futures contract expiring on April 20, 2020, is under finalisation. In the interim, the provisional settlement price for April 20, 2020, is considered as ₹1 per barrel for the computation of members’ obligation for trade date April 20, 2020. The differential settlement, if any, on fixation of the final settlement price shall be done subsequently," said a circular issued by MCX.
The biggest reason for the settlement fiasco was the reduced market hours. On 27 March, bourses had announced a reduction in commodity trading hours till 5pm. Crude oil prices fell at Nymex between 5pm and 11.30pm, India time on Monday and as trading was shut in India during those hours, many brokers could not get out of contracts.
This also affected MCX’s ability to calculate correct settlement prices. The debacle then forced the exchange to revert to regular trade timings of 11.30pm for globally-referenced non-agri commodities.
“This is a settlement disaster and is based on poor contract design, considering you cannot trade between the end of day in India till the contract is settled in the US. Under current rules, buyers of the contracts will have to pay large sums for a negative settlement price in a cash-settlement, but the settlement price of ₹1 was temporarily arrived at," said Deepak Shenoy, founder and CEO, Capitalmind Wealth.
https://www.livemint.com/market/sto...n-crude-settlement-at-mcx-11587482582760.html
MCX April crude oil futures row | Brokers may challenge settlement price in HC
Brokers are upset with the settlement of April crude oil contracts at a negative Rs 2,884 per barrel by MCXCCL
"A number of brokers whose clients have long positions are on same page and planning to challenge this settlement price. We will file for an urgent hearing in the Bombay High Court," a broker told Moneycontrol.
Explaining the crux of the issue, another broker said: "Our market shuts at 5 pm and NYMEX crude traded in the negative late in the night. It is at those prices that MCX is settling its April expiry contract. When our market closed, neither were clients able to cut down their positions nor were brokerages able to seek additional margin against client positions. We had taken hundred percent margin exposure due to expiry day."
https://www.moneycontrol.com/news/b...challenge-settlement-price-in-hc-5174441.html
Brokers are upset with the settlement of April crude oil contracts at a negative Rs 2,884 per barrel by MCXCCL
"A number of brokers whose clients have long positions are on same page and planning to challenge this settlement price. We will file for an urgent hearing in the Bombay High Court," a broker told Moneycontrol.
Explaining the crux of the issue, another broker said: "Our market shuts at 5 pm and NYMEX crude traded in the negative late in the night. It is at those prices that MCX is settling its April expiry contract. When our market closed, neither were clients able to cut down their positions nor were brokerages able to seek additional margin against client positions. We had taken hundred percent margin exposure due to expiry day."
https://www.moneycontrol.com/news/b...challenge-settlement-price-in-hc-5174441.html
Some had even posted here to buy crude futures at Re 1 .. it will surely be in profit. Anyone who had even invested Rs 1000 would be in huge loss running into lakhs. Really bad situation for many who could be stuck in in Crude longs.
On the other side, nobody would short Crude @ Re 1 .. even by mistake, now see where the problem goes .. !!
God help them !!!
On the other side, nobody would short Crude @ Re 1 .. even by mistake, now see where the problem goes .. !!
God help them !!!
Oops, I was not sure who exactly posted, and no hard feelings ... but I suppose it was not exactly a joke but a kind of rational thinking that would pop up in any retailers mind.
Any retailer who would wanted to make quick money would bet that buying at Re 1 price would be a jackpot. Only after the fiasco, one can get to realize what a problem one could fall into.
In any case this is a learning for all, especially for persons like me who are on the sidelines currently
Any retailer who would wanted to make quick money would bet that buying at Re 1 price would be a jackpot. Only after the fiasco, one can get to realize what a problem one could fall into.
In any case this is a learning for all, especially for persons like me who are on the sidelines currently
Similar threads
-
-
Collective Investment Scheme in stocks and futures trading?
- Started by rakamaka
- Replies: 7
-
Trading Futures: Indices Vs Individual Stocks- Started by Trade_Artist
- Replies: 9
-
-