The BSE, Asia's oldest stock exchange, on Tuesday notified that it has modified its systems to accept orders and execute trades at negative prices for the commodity derivatives segment. The exchange's trading system has been upgraded in the wake of the recent global developments in the crude oil derivatives markets where trading of derivatives contracts happened at negative prices, the stock exchange said in a press release.
"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," BSE said.
As a result, existing versions of trading system Application Program Interface (APIs) - ETI (Ethical Trading Initiative) as well as IML APIs will also support trading activity at negative price levels, it added.
"BSE continually changes and upgrades various computer systems to improve its functionalities, make them further suitable to additional regulatory requirements, user/ market demands, information security, risk management etc," a BSE spokesperson said.
"The current changes are a part of series of changes BSE has done since introduction of commodities derivatives in October 2018 after receiving approval from regulator to launch Commodities derivatives. BSE newly introduced contract on BRENT Crude oil is receiving good traction and is considered to be more suitable to Indian requirements by most experts," the spokesperson said.
In a bid 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, the BSE said in the press release.
"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," said the press release.
The exchange said that the features shall be enabled in the simulation environment and made available to members and vendors to test from Monday, May 4, 2020, onwards.
The development came in light of last week's crude oil price debacle due to which Multi Commodity Exchange (MCX) settled April crude oil derivatives contracts at a negative price, in an unprecedented move which was never seen in India's commodity derivatives history.
Multi Commodity Exchange Clearing Corporation (MCXCCL), a wholly owned subsidiary of the MCX India settled April expiry at a negative Rs 2,884 per barrel in wake of record slump in the West Texas intermediate (WTI), a US crude oil benchmark, crude oil price.