Bank of China Seeks CME Group Probe in Negative Oil Prices

Bank of China is pressing Chicago-based CME to probe whether market manipulation or system failure was behind the unprecedented plunge in West Texas Intermediate, the U.S. crude benchmark.

The bank said today it hired lawyers to send a letter to CME Group, urging the exchange operator to investigate reasons behind negative oil prices and “abnormal fluctuations” in crude futures on April 21, according to a Reuters report.

The news came a few days after the Caixin financial news outlet reported on Sunday that total losses from a crude oil product marketed to retail investors by the Bank of China could be more than $1.3 billion.

The huge losses came on the heels of Monday’s price crash, which took U.S. oil futures into negative territory for the first time. Desperate traders at one point paid potential buyers up to $40 a barrel to take oil that they can't accept for delivery on May's expiring futures contract.

The BoC said it was seeking to respond to its customers’ “reasonable requests” as early as possible while it continues negotiating with investors, shoulder responsibilities under the current legal framework.

The letter is believed to be the first request by a foreign entity to the CME and US regulator to probe Monday’s trade. Similar calls arose in the US last week with many requesting a wider probe into possible market manipulation, failed systems or computer programming failures.

CME, however, said the Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad Read this Term in oil prices was due to fundamental supply and demand issues, and not related to financial markets functions. It refuted allegations and said negative prices reflected fundamentals in the physical crude oil market driven by the impacts of the Coronavirus Coronavirus The outbreak of Covid-19 or Coronavirus in early 2020 has since redefined the financial services industry. Brokers have been forced to quickly adapt to several changes, both positive and negative.This includes the FX industry, which saw surges in volumes across the retail and institutional space in Q1 2020. This trend can be explained by an outflow of volatility, coupled with countries taking major moves to stabilize their respective economies.In conjunction with uncertainty caused by the virus, The outbreak of Covid-19 or Coronavirus in early 2020 has since redefined the financial services industry. Brokers have been forced to quickly adapt to several changes, both positive and negative.This includes the FX industry, which saw surges in volumes across the retail and institutional space in Q1 2020. This trend can be explained by an outflow of volatility, coupled with countries taking major moves to stabilize their respective economies.In conjunction with uncertainty caused by the virus, Read this Term, including decreased demand, supply glut, and constraints on crude oil storage.

What’s more, the exchange has changed its computer systems to allow negative pricing in WTI futures contract, anticipating that markets could see a repeat of negative oil prices.