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IS Prime to potentially save brokers from losing millions with its new UK & US Oil Index



IS Prime presented a new solution in response to the huge risk of spot oil prices falling to negative values again. The Prime of Prime and Liquidity Provider developed new UK & US Oil Index aiming to oppose the inability of brokers’ trading systems to accept negative rates.

The last couple of weeks, the overwhelming effects coronavirus-induced lockdown on economies and war on oil triggered dramatic fall in the price of oil. Ten days ago, on 17 April, oil prices plunged to $40 bellow zero for a first time in history. The Covid-19 pandemic significantly reduced the oil consumption and led to oversupply and lack of storage capacity resulting in critical losses by some of the largest retail brokers. Their systems stopped clients out at 0 and hedged in the futures market at a negative rate.

To cope with the inability of many trading systems to accept negative rates, IS Prime has developed two new proprietary products the US Oil Index and the UK Oil Index. The Indices are rebased at $100, meaning that in case of IS Prime’s proprietary spot price fall into negative value, e.g. $-5USD, the pricing will reflect this at $95, effectively preventing stop outs while reflecting the market moves the full underlying volatility of Oil.

US oil index is prime

For its current clients, IS Prime can move positions in its existing US and UK spot indices into the new products.

Jonathan Brewer, Managing Partner at IS Prime commented:

Jonathan Brewer
Jonathan Brewer

Many brokers have not recognised the truly catastrophic effect that negative rates can have on them. Individual retail brokers could face losses in the hundreds of millions of dollars due to stop outs at 0 and subsequent hedges at a negative rate.

Our new fully proprietary Oil Index allows brokers to offer pricing and execution in these products to their clients even if the market drops below 0 again, which is highly probable coming into the next futures expiry.

There will be other providers attempting to develop a solution through third party pricing but, as the market has come to expect from IS Prime, our products are carefully thought out and well-engineered.

We are very pleased to be able to offer continuity of service to new and existing clients and to have delivered a new product in a very short timeframe when it is most needed.


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IS Prime to potentially save brokers from losing millions with its new UK & US Oil Index

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