Crude debacle: BSE to allow trading at negative prices for commodities

The Bombay Stock Exchange (BSE) will soon allow its members to trade at negative prices for commodity derivatives after the prices of crude oil futures plunged into negative recently.

"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. Accordingly, existing versions of trading system APIs – ETI as well as IML APIs will also support trading activity at negative price levels," the BSE said in a notice.

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

"Accordingly, Trading Members and front-end trading application vendors shall be able to place test orders and trade in these contracts at those price levels. This will help members in checking the readiness of their internal systems and make suitable modifications if any required," BSE added.

The above-mentioned feature shall be enabled in the simulation environment and made available to members of the exchange to test from Monday, May 4, 2020, onwards.

Last week, the Western Texas International Prices had crashed to as low as negative (-)$40 a barrel.