Brokerage Moves Rajasthan High Court Challenging Negative Settlement Of Crude Oil Futures

A Jaipur-based brokerage has moved the Rajasthan High Court challenging the negative settlement of the due date rate for crude oil future contracts that expired on April 20.

Hindustan Technosol Pvt. Ltd., moved the high court alleging that the DDR per barrel for crude oil futures on April 20 at 5 p.m. was Rs 965. However, the bourses have recovered amounts at a negative DDR of Rs 2,884 by keeping the trades open till 11:30 p.m., resulting in losses for the traders.

The actions are contrary to the regulations issued by the Securities and Exchange Board of India, it has alleged.

A bench comprising Justice Sanjeev Prakash Sharma has restrained the parties from taking any coercive action against the brokerage and has directed issuance of notice to the Ministry of Finance and the connected respondents. It will take up the matter for hearing in the last week of May.

This comes after an unprecedented fall in the global crude oil prices pushed the value of futures into negative territory. In response, India's two commodity exchanges—MCX and Multi Commodity Exchange Corporation—had issued a circular assigning a negative DDR of Rs 2,884 for settlement of crude oil contracts which are mapped to the New York Mercantile Exchange's futures.

Brokers battered by the losses have also moved the Bombay High court challenging the settlement of crude oil contracts at negative prices and initiated arbitration proceedings against their clients to recover the dues. They have also challenged the legal validity of the circular issued by the commodity exchanges.

The Bombay High Court will hear the matter in June.