Moscow Exchange works on trade in derivatives with negative prices

MOSCOW, Apr 23 (PRIME) -- The Moscow Exchange is working on a derivative trade mechanism when prices for the underlying asset are negative, the bourse said in a statement on Thursday following a meeting of the derivative market committee.

“The committee supported the initiative of the Moscow Exchange to develop and introduce a mechanism to trade derivative financial instruments given negative prices for the underlying asset and recommended working out its implementation taking into account regulatory and tax aspects and readiness of market players,” the statement read.

The bourse will adjust its systems and processes for the mechanism in several months, and discuss measures to reduce trade risks for oil contracts due to negative prices together with the market players, the bourse said.

The exchange will not recalculate expiration prices for the WTI oil blend after a response of CME Group, which includes the NYMEX, the bourse said.

“Representatives of the Moscow Exchange notified members of the committee that CME Group answered to a request of the Moscow Exchange and pointed to reasonability of the existing settlement price of the April contract for the Light Sweet Crude Oil and the lack of plans to revise it. Correspondingly, the Moscow Exchange has no possibility to recalculate the expiration price for its clients,” the statement read.

The bourse also plans to introduce a mechanism for changing the pricing corridor for the evening session of the derivatives market. The ban on changes in the pricing range during the evening session was set earlier following recommendation of market players with the goal of reducing the risks and fight manipulations during the low-liquid evening trade.

“The market thinks that the changes in the pricing corridor during the evening trade session on the derivatives market for these ‘mirror’ contracts will allow them to reduce their risks and risks of their clients,” the exchange said.

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