The US Commodities Futures Trading Commission (CFTC), the federal regulatory agency which oversees commodities markets on Thursday warned exchanges and brokerages of more volatility and possibility of prices for certain contracts going down to below zero.
This statement came almost a month after the US WTI futures contract plunged to negative territory for the first time in history at minus $37.63/barrel, due to panic selling amid the lack of storage. This incurred loss for numerous funds and brokerages with exposure to the contract. They have then switched their holdings to longer-term contracts while reducing holdings in near-term contracts.
CFTC in a letter dated May 13, urged brokerages and exchange operators to potentially intervene to protect customers and protect markets from manipulation. The agency also told exchanges that they require rules to give them authority to transfer or liquidate open positions in a contract or potentially halt trading in a particular contract amid emergencies.
