MCX will now allow crude oil trading in negative, exchange releases API to record prices below zero

A month after settling the crude oil contracts in the negative, India’s largest commodity derivative segment, MCX, has released a new application programming interface which will facilitate a negative price on its software.

A month after settling the crude oil contracts in the negative, India’s largest commodity derivative segment, MCX, has released a new application programming interface (API) which will facilitate a negative price on its software. When the WTI crude oil futures fell to a negative $37.63 per barrel in the month of April, MCX settled the crude oil prices at a negative Rs 2,884 despite its software not permitting negative price trade. Earlier the Bombay Stock Exchange had also stepped-up and introduced trading in negative prices for crude oil on its commodities derivative segment Commex.

“Members are requested to note that the Exchange has released a revised version of MCX Application Programing Interface (API) version 17.7 dated May 20, 2020 (Non- FIX) and FIX API version 17.6 dated May 20, 2020 to accept the negative price in the system,” MCX said in a circular. Most of the trading in crude oil in India happens on the MCX platform. “The API has been shared with Empanelled vendors and Members developing software in-house,” MCX added. 

Effective trading in negative prices for crude oil could still take some months. After suffering huge losses in April, when the prices dropped below zero, brokerage firms have now increased margins for trading in crude oil or have stopped trading. The closing of crude oil futures in the negative has also forced certain members of the exchange to seek the legal route. Crude oil contracts on MCX mirror the prices on NYMEX, however keeping in mind the trimmed market hours during the nation-wide lockdown closed ahead of time, making it difficult for clients to exit their positions when the prices slipped into negative on the NYMEX.

The sharp drop in the price of WTI Crude Oil futures was aided by the slumping demand owing to the coronavirus pandemic that has brought the world to a virtual shut down. WTI Crude oil has now surged from its April lows and was trading at $33.57 per barrel, however, it is still trading at half its price in January this year. Brent Crude was trading at $35.27 per barrel.