IS Prime Launches Rebased Oil Index to Prevent Stop Outs - The Industry Spread

Ricardo Esteves

Ricardo Esteves has seen business and economics through many lenses. He joined the Financial Services Industry in 2009, and has been a financial journalist since 2011. He holds a degree in Business Administration and has experience producing real-time news, from both buy-side and sell-side, as well as for retail traders, brokers and service providers. Esteves' work has appeared in a variety of online publications including FX Street and FinanceFeeds.

IS Prime

IS Prime Launches Rebased Oil Index to Prevent Stop Outs

April 28, 2020

IS Prime has launched a solution to combat the huge risk associated with the spot oil price potentially going negative again as many brokers’ trading systems are unable to accept negative rates.

For the first time in history, Oil prices fell below zero due to a combination of lack of demand and lack of storage capacity. Some of the largest retail brokers in the space faced significant losses due, in part, to their systems stopping clients out at 0 and hedging in the futures market at a negative rate.

IS Prime’s two new proprietary products, the US Oil Index and the UK Oil Index, are rebased at $100, which should prevent stop outs whilst still reflecting the market moves and the full underlying volatility of Oil. For example, in case of a spot price fall to $-5USD, the pricing will reflect this at $95.

IS Prime can move positions in its existing US and UK spot indices into the new products for current clients, to assist with the transition to these products.

Jonathan Brewer

Jonathan Brewer, Managing Partner at IS Prime said: “Many brokers have not recognized 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.

“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”, Brewer added.

IS Prime’s Oil Index allows brokers to offer pricing and execution in these products to their clients even if the market drops below 0 again. The FCA-regulated Prime of Prime and liquidity provider considers this to be highly probable coming into the next futures expiry.

The firm has recently integrated Pelican’s proprietary copy-trading technology into its trading platforms in order to offer these tools to clients as part of a solution to help drive volumes and customer engagement. IS Prime combines Pelican’s copy and trading tools with its Batch Hedger, the batch hedging tool specifically designed to support EA, copy, and social trading activity. The combination allows the PoP broker to provide clients with market-leading copy and social trading solutions which can play a key role in driving volumes whilst maintaining core spreads.

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