Post WTI rout, BSE modifies system for negative pricing of commodities
In the wake of the WTI crude futures falling below zero last week, the BSE has modified its trading system to allow commodity trading at negative prices.
 
In a notice, the BSE said that the development is pursuant to recent global movements in the crude oil derivatives markets where trading of futures contracts happened at negative prices owing to various underlying factors.
 
"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," it said.
 
It also said that the existing versions of trading system APIs -- ETI as well as IML APIs -- will also support trading activity at negative price levels.
 
To facilitate testing of this feature in the simulation (test) environment, trading price range of Brent Crude Oil futures contracts shall be suitably updated to accept orders at negative price levels and execute trades, said the exchange.
 
Trading members and front-end trading application vendors shall be able to place test orders and trade in these contracts at those price levels, it said, adding that this will help members in checking the readiness of their internal systems and make suitable modifications, if any required.
 
The feature will be enabled in the simulation environment and made available to members and vendors to test from Monday, May 4, onwards.
 
Further, outlining the benefits on hedging in Brent crude oil for Indian traders and market participants on the bourse, the BSE, in a presentation, described the upgraded feature as a safeguard for Indian market participants.
 
The development comes after the May delivery contract of West Texas intermediate (WTI) on the NYMEX fell in an unprecedented price movement went below zero dollars on April 20 and shed more than 300 per cent to settle at (-)$37.63 per barrel.
 
The presentation further said that at BSE, Indian market participants can access global Brent benchmark prices at convenient and cost effective prices.
 
Brent is the price barometer used by 70 per cent of global crude oil users and the Indian basket of crude oil represents a derived basket comprising of Sour grade (Oman & Dubai average) and Sweet grade (Brent Dated) of crude oil processed in Indian refineries in the ratio of 75.50:24.50.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    COVID19: Agri-Commodities Take a Hit on Labour, Logistics Woes, says CRISIL
    There has been a sharp decline in arrivals of agri commodities in the first two weeks of April, mandi prices of vegetables, pulses and rabi crops have increased sharply, while rates of fruits, paddy and fibre crops have shown a significant decline, says a research note.
     
    In the report, ratings agency CRISIL says, "While there are four primary reasons for the sharp decline in arrivals – delayed rabi harvest, labour shortage, lack of transport, and reduced mandi operations – grains are also said to be hoarded by farmers and traders to be sold at a later date when mandi operations and logistics normalise."  
     
    "But in the case of perishables such as fruits and vegetables, farmers are bearing the brunt of the crash in demand because of the lockdown. Exports of grapes and mangoes are also halted. The upshot is that prices of fruits are 10% lower domestically despite an 85% fall in arrivals," it added.
     
     
    Mandi arrivals across commodities declined 68%-99% during 1st and 12 April 2020 due to delayed rabi harvest, labour shortage, lack of transport and reduced mandi operations.
     
    Mandi prices of fibre crops and paddy and coarse grain declined 31% and 2%, respectively, in the first 12 days of April, even though arrivals dipped 99% and 68%, respectively. "Mandi prices have logged a sharp decline despite significantly lower market arrivals due to lower domestic and export demand for cotton crop," the report says. 
     
    In case of fruits, CRISIL says, mandi prices have declined due to lower exports of seasonal crops, such as mango and grapes, and limited domestic offtake amid the lockdown.
     
    The report indicates increase in consumption of pulses during the lockdown. Increase in demand has raised mandi prices 28% this month. Higher demand has also increased hoarding that has too kept the prices up.
     
    The case is similar for vegetables, the ratings agency says, adding mandi prices have shot up 83% during first 12 days of April. "Mandi prices (of vegetables) have increased sharply on-year as arrivals have plunged due to restricted market access to farmers. But middlemen estimated to be procuring at much lower prices from farmers given their limited bargaining power due to perishable nature of commodities," it added.
     
    In case of rabi crops, primarily wheat, delayed harvesting due to labour shortage has pushed up prices by up to 29% at mandis. But projections of a bumper output, lower industrial demand and limited exports were likely to exert pressure on wheat prices, the ratings agency says.
     
    The case for paddy and coarse grain, however, is different where arrivals have fallen due to curbs on inter-state movement of goods and non-availability of logistics partners. Also, decline in industrial and animal and poultry feed demand for coarse grain is estimated to have led to a decline in mandi prices.
     
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    Expensive metals, crude boom; gold touches new high
    Prices of gold, silver and crude oil surged on Wednesday on the Indian futures market MCX, following the rise in bullion and crude prices in the international market due to deepening military tensions between the US and Iran.
     
    In the domestic futures market, the price of gold rose to a new high, while in the international market, it is at an almost seven-year high.
     
    Gold in India's largest futures market, Multi Commodity Exchange (MCX), was trading at Rs 41,193 per 10 grams at 9.30 a.m. on the February expiry contract, an increase of Rs 530 or 1.30 per cent as compared to the previous price of Rs 40,946 per 10 gms that later jumped to Rs 41,278 per 10 grams.
     
    Silver was trading at Rs 48,661 per kg, up by Rs 550 or 1.15 per cent, from the previous session of the March contract. At the same time, in the January contract, the crude oil was trading at Rs 4,572 per barrel, up by Rs 78, or 1.74 per cent from the previous session. 
     
    Bullion has gained momentum in the international market due to deepening military tension between the US and Iran. In the international market, the price of gold crossed $1,600 an ounce on Wednesday which is a seven-year high.
     
    On Wednesday, gold on the international futures market COMEX was trading at $1,591.35 an ounce with a gain of $17.05 or 1.08 per cent in the February contract, while gold traded up on Comex to $1,612.95 per ounce during the previous trading, which is the highest after February 2013. On February 19, 2013 the gold rose to $1,617 an ounce.
     
    Silver was trading at $18.60 an ounce in the March contract of COMEX, up by 1.14 per cent from the previous session.
     
    The rise in gold prices is seen as a safe haven investment in the wake of geo-political tension in the Middle East. 
     
    On Wednesday, 10 rockets were fired at the Iraq-based Al Assad airbase, which has a large number of US troops, according to the Efe news. The attack comes after Iran's commander General Qasem Suleimani died on January 3 in a US drone strike, which is seen as a retaliation by Iran.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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