Two brokerages on Wednesday moved
the Bombay High Court against the Multi Commodity Exchange (MCX) of India and markets regulator Securities and Exchange Board of India (Sebi) over negative settlement of a futures contract in oil after the heavy fall in the price of crude globally.
Motilal Oswal Financial Services and PCS Securities Pvt Ltd have challenged an April 21 circular issued by MCX fixing the Due Date Rate of Crude Oil futures contract, expiring on April 20, at a negative value of Rs 2,884 per barrel.
The petitioners' advocate Ravichandra Hegde on Wednesday sought urgent hearing via video conference on Thursday.
The petitioners' contention is that the negative pricing is "unprecedented and against the contours of law and rules of Exchange".
There is no delivery-based settlement for crude contracts and the same are settled in cash on the exchange, and such contracts ought to be traded at Rs 1 at the least rather than making them negative, the petition said.
In a series of tweets, Motilal Oswal Financial Services clarified that it doesnt have any proprietary exposure.
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"We have many clients who have exposure in Crude and we were fully covered till the price was zero, and even little more....There is no way any broker can have ample cover to take care of such risk.
"We are confident of fully recovering the money from clients and also we are helping them with all possible legal recourse," it said, adding that the total dues from clients are RS 80 crore.
It can be noted that WTI (West Texas Intermediate) oil had plummeted over 400 per cent intraday to a historic low of minus USD 50 per barrel on Monday.
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