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

in George Xianzhi Yuan ed., The CME Vulnerability: The Impact of Negative Oil Futures Trading, World Scientific, pp. 85-101 (2020).

16 Pages Posted: 10 May 2021 Last revised: 11 May 2021

See all articles by Duoqi Xu

Duoqi Xu

Fudan Univeristy Law School; Shanghai Advanced Institute of Finance

Peiran Wang

Fudan Univeristy Law School

Yicheng Wang

Fudan Univeristy Law School

Date Written: August 10, 2020

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, crude oil futures, negative price, market manipulation, rule-making procedure, legal responsibility

JEL Classification: G18, K22

Suggested Citation

Xu, Duoqi and Wang, Peiran and Wang, Yicheng, Three Legal Reflections on the 'Crude Oil Treasure' Incident: Starting with the CME Rule Change (August 10, 2020). in George Xianzhi Yuan ed., The CME Vulnerability: The Impact of Negative Oil Futures Trading, World Scientific, pp. 85-101 (2020)., Available at SSRN: https://ssrn.com/abstract=3842706

Duoqi Xu (Contact Author)

Fudan Univeristy Law School ( email )

Shanghai, Shanghai
China

Shanghai Advanced Institute of Finance ( email )

Room 1214, 211 Western huaihai Road
Shanghai, Shanghai 200030
China

Peiran Wang

Fudan Univeristy Law School ( email )

Shanghai
China

Yicheng Wang

Fudan Univeristy Law School ( email )

Shanghai
China

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