Posted In:

Oil Futures, WTI

Pool Full Of Oil


Apr 25, 2020


Posted In:

Oil Futures, WTI


Apr 25, 2020



When the internet is flooded with questions like “can I store oil in my pool?” - it is fair to assume some retail investments are going to sink…

West Texas Intermediate (WTI) oil futures contracts for May reached a startling negative $37.63. Despite the softness in demand, some are speculating that WTI futures fared worse than their peers because they have to be settled physicallyunlike (British) Brent futures which are settled financially.

ETFs, which own large baskets of these futures, are the conduit for retail investors to buy oil futures. While futures prices can clearly go negative, an ETF – as a security – can’t trade at prices below zero.

Brokers who facilitate their customer's ETF investments end up footing the bill with the clearinghouses when the price hits subzero. Interactive Brokers, one of the largest publicly traded brokers, fulfilled the variation margin settlements on behalf of customers and recognized an ~$88m provisionary loss.

CME Group, which controls 90% of global futures, had just changed its computer systems earlier this month to allow negative pricing in WTI. Other exchanges may have not fared as well – sticking to older mainframes and unable to logically understand negative pricing.

Capital markets technology is continually being put to the test: Y2K, NYSE going digital for the first time (our Mar 21 newsletter), and Crypto exchanges gargantuan plunge last month.

While retail investors were searching the web for oil storage options – some were lucky their losses were capped at 100%...

Portfolio News

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FormFree and Ocrolus partner on comprehensive borrower income verification program - FormFree®, a leading credit decisioning service for lenders and brokers, announced a partnership with portfolio company Ocrolus, to power API calls from Ocrolus for paystub and W-2 tax form collection and data verification. Read more

Pool Full Of Oil

Why is the oil price negative and can you buy some? You must have a membership to trade directly on this market. To be a member you must be “an adult possessing good moral character, a good reputation, business integrity, and adequate financial resources to assume the responsibilities and privileges of membership.” You also have to pay a fee, which costs roughly $100,000. Or you can do it through a broker. Read more

Negative oil prices pose headache for futures giant CME - While CME doesn’t specify how much money it makes from individual contracts, UBS analysts estimate that about 14% of its revenue this year will come from energy, which includes oil, natural gas and other contracts. Last year CME posted $4.9b in total revenue. Read more

Industry News

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Betterment adds checking and savings products - New York based automated advisory service for wealth management is adding FDIC-insured checking and savings account services through partnerships with several banks. Read more

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Multi-bank instant payments accelerate in Latin America - Banks are joining forces in Brazil, Mexico and Peru to develop instant payments systems that work cheaply and effectively across a wide range of banking platforms. Read more

China rolls out pilot test of digital currency as the U.S. sends paper stimulus checks - China’s central bank has introduced a homegrown digital currency across four cities as part of a pilot program, marking a milestone on the path toward the first electronic payment system by a major central bank. At the same time, the U.S. is mailing out paper stimulus checks - what a juxtaposition! Read more

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Monzo leapfrogs Revolut by applying for US banking license - The digital banking start-up, which has 4 million customers in the UK, applied to the US Office of the Comptroller of the Currency for the license on April 20. Read more

The World Bank predicts global remittances will fall by 20% this year - According to the latest forecast by the World Bank this would be the largest single-year decline in remittances in the past century. The last global financial crisis saw remittances drop by 5% in 2009. Read more

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Select Financings

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Bestow - Dallas, Texas based digital life insurance provider raised $50m in Series B funding led by Valar Ventures. Read more

Digits San Francisco real-time finance dashboard for startups raised $22m in Series B funding led by GV. Read more

Igloo - Singapore based digital consumer insurance startup has raised $8.2m Series A led by InVent. Read more

Modalku - Indonesia based P2P lender raised $40m in Series C funding from undisclosed investors. Read more

Remote - San Francisco based HR startup for global employment raised $11m in Seed funding led by Two Sigma Ventures. Read more


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