BSE enables negative price trading in crude oil, testing on Monday

Exchange's BOLT Plus trading system has been modified to execute such trades, existing versions of the trading system will also support negative pricing

India’s oldest stock exchange, BSE, has enabled its system to execute trading in negative territory. The updated software will be available for members testing from May 4.

BSE Brent crude contract, based on ICE Brent futures contract, expires at the end of each month. “Pursuant to recent international crude oil derivatives markets trading at negative prices, in the BSE’s Commodity Derivatives segment, the exchange’s BOLT Plus trading system has been modified to accept orders and execute trades at negative prices. Accordingly, existing versions of the system will also support trading activity at negative price levels,” the BSE stated in a note on Tuesday.

The BSE’s move comes amid the controversy over the Multi Commodity Exchange (MCX) settling the April contract for crude oil (based on New York Mercantile Exchange) in negative territory. Several brokerages have move court against this move, claiming the MCX’s software wasn’t enabled for negative trading.  The MCX has asked its software vendor to amend the software to enable it for negative trading. 

Narinder Wadhwa, president, CPAI, said the BSE enabling negative price trading was a good move. “But we have realised after the MCX episode that they (international contracts, especially Nymex WTI crude) are non-comparable contracts for our settlement reference rates because Nymex contracts have the option to give delivery. Since crude oil contracts on our exchanges are cash-settled, in our opinion it should not be negative. The lower end should be Rs 1,” Wadhwa said.