Three Legal Reflections on the “Crude Oil Treasure” Incident: Starting with the CME Rule Change

Duoqi Xu, Peiran Wang and Yicheng Wang

Chapter 4 in The CME Vulnerability:The Impact of Negative Oil Futures Trading, 2020, pp 85-101 from World Scientific Publishing Co. Pte. Ltd.

Abstract: The fall of crude oil futures into extreme negative prices has raised concerns globally. On the one hand, although the negative price mechanism facilitates market price discovery to some extent, in the delivery month it can trigger serious consequences such as abnormal market price fluctuations due to insufficient liquidity, which creates extreme market injustice and raises suspicion of manipulation. On the other hand, the reckless change of programs, which allow negative prices, lacks necessary legitimacy at the procedural level. Market participants who have been treated unfairly should actively defend their rights, and United States regulators and the Chicago Mercantile Exchange Group Inc. (CME) should explain to the market with thorough investigations and credible conclusions. The negative oil price incident is a profound warning and lesson for financial institutions and regulators in China.

Keywords: CME; Vulnerability; WTI; Oil; Trading; Rule; 420; Negative Trading Price; Best Practice; Valuation; Risk Management; Regulatory; Rule; Accounting; Standard; Fair Value; Trading Behaviour; Covid; Corona (search for similar items in EconPapers)
JEL-codes: G1 G10 G17 G32 (search for similar items in EconPapers)
Date: 2020
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