The Multi Commodity Exchange of India (MCX) has released risk management measures to cover fluctuations in crude oil prices.

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The move comes after the BSE modified its trading system to accept negative price orders and execute them. Almost all trading in crude oil futures in India happens on the MCX platform.

According to a circular from the MCX, an initial margin of 100 percent shall be levied for all existing and yet to be launched crude oil contracts. A minimum Initial margin of Rs 95,000 per lot shall be levied.

An additional margin of Rs 1 lakh per lot shall be levied on near month crude oil futures contract and on short side of near month crude oil options contract. Further, an additional margin of Rs 50,000 per lot shall also be levied on all other crude oil futures contracts and on short side of crude oil options contracts (including yet to be launched crude oil contracts).

Moreover, if the price of the crude oil falls between 50-75 percent, then an additional margin of 50 percent of the MTM would be levied.

If the price of crude oil falls between 75-90 percent, an additional margin of 100 percent of the MTM would be levied and if the price falls beyond 90 percent then an additional margin of 125 percent of the MTM would be levied.

The provisions of this circular shall be applicable from April 30, 2020, MCX said in a statement.

The Volatility Scan Range (VSR) shall be increased from 5 percent to 20 percent for all existing and yet to be launched crude oil options contracts, it added.

Meanwhile, the extreme loss margin of 1.25 percent shall continue to be levied on all crude oil futures contracts and on short positions of all options contracts.