1.The May contracts of Light Sweet Crude Oil Futures and E-mini Crude Oil Futures of the Chicago Mercantile Exchange Group (CME) were traded at a negative value on April 20 U.S. time (April 21 Taiwan time) and the final settlement price of E-mini Crude Oil Futures on that day was negative US$37.63; losses and ensuing disputes occurred to Taiwanese traders engaged in the trading of the above contract through FCMs’ sub-brokered foreign futures trading services. Therefore, the FSC conducted an inspection on the internal control and internal audit operations of the futures industry to see if there are any deficiencies that need to be improved upon.

 

2.In this inspection, the main deficiencies of FCMs are as follows: (1) FCMs did not timely announce that CME crude oil futures commodities could be traded at a negative value; (2) FCMs'' trading hosts were unable to accept negative value orders; (3) FCMs'' trading hosts could not correctly calculate the profit and loss and number of lots of the customer''s foreign futures account under negative value; (4)  FCMs did not issue a notice to high-risk accounts and did not carry out offset operations.

 

3.After comprehensive consideration of the violation of rules and regulations by FCMs and their settlement and negotiation with traders, the FSC made administrative sanctions on FCMs for their violation of futures management laws, regulations, and internal control systems, and 12 FCMs were fined a total of NT$5.16 million.

 

4.In order to protect the rights and interests of traders, the FSC has asked the Securities and Futures Investors Protection Center (SFIPC) and the Financial Ombudsman Institution (FOI) to assist in mediation and ombudsman matters and requested FCMs to actively cooperate on the mediation and ombudsman. In addition, if the situation requires, SFIPC will convene a mechanism for the Chinese National Futures Association (CNFA) and FCMs to discuss similar cases of disputes in order to reach an agreement. 

 

5.Considering the fact that both CME and ICE announced in April 2020 that contracts such as crude oil futures could be traded at negative value in the future, the FSC wrote to CNFA to assist FCMs in adding negative value trading and settlement functions to their trading hosts. The adjustment was completed by FCMs before the end of August 2020.