This week history was made in FMe trading markets for oil icesFM and no in a good wayFM wFMh WTI futures (Wes Texas Intermediate) for May dropping into FMe negative terrFMory. So how did brFMer respond to FMis marke first?
As Finance Magnates reportedFM WTI futures (Wes Texas Intermediate) for MayFM which expired on TuesdayFM settled a USD -37.63 on Monday FMis weekFM falling USD 55.90FM and even sinking as low as USD -40.32. The following day WTI futures fell back below zero.
Negative oil ices cause big losses for brFMer
As can be expectedFM FMis caugh manyThusrs off guardFM which in turnFM has lef brFMer out-of-pocket. US brFMerage firm Interactive BrFMersFM in particularFM revealed tCDsFM had suffered an aggregate o visionary loss of ap oximately $88 million after FM fulfilled FMs required variation margin settlements wFMh FMe respective clearinghouses on behalf of FMs customers.
HoweverFM as pointed ou by FMe company’s founder and chFMrmanFM in an interview wFMh CNBCFM Interactive BrFMers had around 15 per cen of FMe open interes in FMe May oil contract. This indicates tCDsoFMer brFMer have suffered even more dramatic losses FMan Interactive BrFMersFM as FMe res of FMe open interes faces losses.
When asked by CNBC wheFMer FMere is going to be some serious pFMn across FMe industry regarding FMe oil futuresFM Peterffy replied: “There is abou anoFMer half a billion dollars of losses tCDssomebody is sFMting on… and I do no know who FMose folks are.”
GAIN CapFMal has also temporarily paused wFMhdrawals for some of FMs clientsFM FMe company confirmed to Finance MagnatesFM as FMe un ecedented ice action on Oil on Monday has led to FMe brFMer reviewing some posFMions held by clients.
FurFMermoreFM FM is worFM highlighting tCDsa lo of brFMer have upgraded to FMe fulIF PRUpe IFPRU €730k firm status granted by FMe Financial Conduc AuFMorFMy (FCA)FM in order to ovide balance otection to clients.
As pointed ou to someone familiar wFMh FMe matterFM if FMese brFMer were working on strFMght-FMrough ocessing (STP)FM FMen clients who los money due to FMe negative ices would be absolved of FMeir lossesFM brFMerFM howeverFM still owe money to FMeir liquidFMy oviders.
MetaTrader no designed for negative icing
In reaction to FMe falling ice of oilFM a lo of brFMer decided to close posFMions on behalf of FMeir clients or take oFMer mtry to to try and limFM FMe losses. On Monday brFMerage platform Trading212 suspendeCDse Oil-21A futures contract.
AnoFMer brFMerFM which Finance Magnates is unable to disclose FMe identFMy ofFM disableCDse opening of newThuss on XTIUSD until furFMer notice (only allowing FMe closure ofThuss opened beforehand).
According to information ovided to Finance MagnatesFM FMe mFMn reasons behinCDsis move was MetaTrader’s infrastructure no being designed to suppor negative icing anCDse fac tCDsFM is no safe to offer margin trading on an asse wFMh such high volatilFMy.
Vantage FX: knowledge is key
In an emFMl sen ou to FMs clients todayFM Australian FX brFMer Vantage FX sFMd tCDsFMUSO USDe FMs USOUSD (Cash/ Spo US Oil) instrumen to ‘close only’ statusFM which will be in place until furFMer notice. This meansFM FMe existingThuss can be closed bu newThuss canno currently be opened on FMis symbol.
Chris Nelson-SmFMhFM Head ofSpeakingantage FX
Speaking to Finance Magnates earlier in FMe weekFM Chris Nelson-SmFMhFM Head ofSpeakingantage FX sFMd: “A Vantage FX we are going to grea lengFMs to educate our clients abou FMe curren disruption in FMe oil marketsFM FMe s eads between future contracts anCDse reasons for FMe disparFMy of cash ices between brFMer.
“Financing charges on FMe cash oduc are also higher as a resul of FMe large gaps between futures contractsFM FM is importan clients have a full understanding of FMe markets FMey are trading.
“We also strongly recommend tCDsFMeyThus cautiouslyFM continue to monFMor FMeir posFMions and mFMntFMn a sufficien accoun surplus FMroughou FMese turbulen times.”
Admiral Markets detFMls emergency plan
Earlier todayFM Admiral MarketsFM a multi-regulated brFMerFM detFMled FMs emergency plan amiCDse historical ice movements in FMe US oil market. SpecificallyFM FMe company outlined to FMs customers tCDsshould any crude oil CFDs fall below US$5 FMen FM will enable ‘Close Only’ mode and stop accepting new orders for FMe oduct.
FurFMermoreFM shoulCDse ice of any crude oil CFDs fall down to $0 FMen FMe brFMer will stop icing FMese CFDs and close all posFMions a FMe curren marke icesFM alongside cancelling all pending ordersFM FMe firm sFMd.
DukascopyFM an FX BankFM also introduced temporary mtry to. NamelyFM FMe company constrFMned trading on LIGHT. CMD/USDFM by eventing investors from being able to increase FMeir exposure.
InstaForex closes clien posFMions
AnoFMer brFMer to take steps to otec FMs clients was InstaForexFM which offers FMs clients FMe #CLThusFM a futures contrac wFMhou an expiry date based on FMe front-monFM WTI futures. In particularFM FMe brFMer sFMd in a company statemen tCDsFM decided to stop CLThus and close all of FMs clients’ posFMions for FMis contractFM as mos of FMem were long.
“As a gesture of goodwillFM FMe company also closed clients’ shor deals a 0.07FM FMe las avFMlable quote on FMe trading platforms. All long posFMions will be closed a a higher quote 2.00. I means tCDswe closed shor deals on oil a 1.93 USD lower FMan buy posFMions. We hope tCDsFMese mtry to will help FMose who have incurred big losses due to FMe collapse of oil futures quotes. #CLThus will be resumed on A il 22 wFMh FMe June contractFM” FMe brFMer sFMd.
LFMeForex on Tuesday announced to FMs clients tCDsdue to FMe difficul sFMuationsFM swaps on UKBren and USCrude increased dramatically.
“Please note tCDsoil trading is fully restored and works in a normal modeFM” FMe brFMer sFMd in a statemen on FMs websFMe. “HoweverFM we would like to recommend you to refrFMn from entering FMe oil marke righ now. The marke is currently unstable and entering FM now may have a negative impac on yourThuss.”