InvestorQ : Why have some commodity brokers dragged MCX to court over the Crude Oil settlement on 20 April?
Riya Dwivedi made post

Why have some commodity brokers dragged MCX to court over the Crude Oil settlement on 20 April?

Answer
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rhea Babu answered.
5 months ago


In fact, 3 broking firms viz. MOFSL, Religare and PCS Securities moved the Bombay High Court against MCX’s decision to arrive at a negative settlement price of Rs.(-2,884) per barrel for crude oil contracts that expired on Monday. The petition has claimed that neither MCX nor any other commodity exchange in India has any provision to trade commodities / stock by assigning a negative value to it. These brokerages have sought a stay on the settlement of the contract till final orders. Crude Oil futures contracts are settled in cash on the exchange based on NYMEX prices and there is no delivery-based mechanism for these contracts in India. Thus, assigning a negative value is arbitrary and illogical as that cannot be allowed in a cash settlement. The negative settlement price is expected to lead to an estimated loss of Rs.435 crore to traders holding long positions on Crude Oil. The petition also pointed out that since the MCX closed at 5.00 p.m. (due to covid-19 notifications) investors were not able to cut down their positions. Had MCX been open for trade, clients would have had the opportunity to exit positions.