Negative pricing: MCX to provide exit option for all commodities

Our Bureau Mumbai | Updated on May 11, 2020 Published on May 11, 2020

MCX, the country’s largest commodity exchange, has extended the benefit of auction process to exit open position for all commodity derivatives irrespective of their link to international market for arriving at final settlement price.

The auction will kick-in if the price of the commodity freezes at ₹1 and remains at the same level during the last 15 minutes of trading (currently 11.15 pm to 11.30 pm) while the corresponding international reference contract is trading at negative price.

Since the exchange does not have the facility to trade in negative pricing, it will provide an additional facility by conducting a separate auction session to facilitate market participants to close out and square off their open positions.

A separate message on the timing of the auction will be flashed on trading terminals of the members. However, this facility will not be available on the expiry day of the contract.

As an abundant caution, the auction facility will also be available for all contracts including base metal future contracts which are settled through price polling.

Crude contract effect

The exchange recently attracted investors ire for settling the April crude contract at negative $₹2,884 a barrel, leading to a loss of ₹435 crore.

Participants having open position in the concerned expiry contract at the end of the day will be considered as eligible participants.

The auction facility is for market participants to square of their existing open position and will not be permitted to create any fresh positions through this facility, said MCX.

Published on May 11, 2020

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