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

In: The CME Vulnerability The Impact of Negative Oil Futures Trading

Author

Listed:
  • Duoqi Xu
  • Peiran Wang
  • Yicheng Wang

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.

Suggested Citation

  • Duoqi Xu & Peiran Wang & Yicheng Wang, 2020. "Three Legal Reflections on the “Crude Oil Treasure” Incident: Starting with the CME Rule Change," World Scientific Book Chapters, in: George Xianzhi Yuan (ed.), The CME Vulnerability The Impact of Negative Oil Futures Trading, chapter 4, pages 85-101, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789811223204_0004
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    More about this item

    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;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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