The leading regulator of commodities markets in the United States warned exchanges and brokers to be prepared for volatility and possible negative prices in certain contracts, in a notice that comes almost a month after the futures of the Petroleum in the US have collapsed into negative territory for the first time in history.
Last month, the contract closest to the maturity of U.S. oil futures plummeted to -37.63 a barrel, as panicked investors sought to exit their positions when they realized they could be forced to receive physical deliveries of oil without take place to store the barrels.
Contract holders are expected to receive physical delivery of oil to the Cushing storage center in Oklahoma, but local inventories were quickly filled as market demand fell by more than 30%.
The U.S. Commodities and Futures Trading Commission, the federal agency that oversees futures and options transactions, said in a letter dated Wednesday that stock market traders and brokerage firms need to assess their internal risk controls and protect markets from manipulation. .
The warning comes on the eve of next week’s US WTI oil contract due for delivery in June.
“We are issuing this warning due to the high volatility, which is unusual, and the negative price experience experienced in the WTI contract with physical delivery and related reference contracts on April 20,” said the CFTC in the document.
The CFTC told exchanges in the letter that they are responsible for preventing manipulation and price distortions. The agency also said that exchanges need rules that give them the authority to settle or transfer open positions in a contract in emergency situations, or potentially suspend operations with a specific contract if necessary.
The regulator also said that brokers should monitor client accounts to ensure that they do not default on their positions or fall short of the required margin levels.