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ICE proposes limit on Dubai oil futures positions in 2017

Intercontinental Exchange Inc has proposed limiting the size of positions investors can hold next year when trading Dubai futures, a document issued by the exchange to its members showed.

The proposed measure is aimed at securing the reliability of the contract, as trade volumes and open interest for the Asian crude oil benchmark have grown since 2012, ICE said in the circular.

The proposal comes more than a year after trade volumes hit an all-time high in August last year and whipsawed Asia’s crude oil market, leading to calls for more regulatory oversight in the sector.

“This will likely curb speculative behavior. (Trading) profits are not made on the Platts window but in swaps (paper positions),” a Singapore-based trader said, referring to oil pricing agency Platts’ Market-on-Close process, in which physical oil trades contribute to its price assessments.

ICE has proposed a position limit of 6,000 lots, or 6 million barrels of oil, that will apply from the first to the final trading day of the expiry month.

Market participants can apply to ICE for exemption from the limit if they have a commercial rationale to hold a larger position.

The measure is expected to affect companies who take large positions in the market, and they may circumvent the limit by using other clearing platforms such as CME’s ClearPort or conducting bilateral trades, trade sources said.

But it could also encourage more trading of ICE’s Brent futures and DME’s Oman contract, said a second Singapore-based trader.

Members are expected to submit feedback by Nov. 30 and a decision will be made by Jan. 3, ICE said. The position limit could apply to contracts from May 2017 delivery onward, it said.

ICE did not respond to an email from Reuters seeking comment.

Traders of the global oil price marker ICE Brent futures have a position limit of 6,000 contracts in the last five business days of a trading month, according to the exchange’s website.
Source: Reuters (Reporting by Florence Tan; Editing by Amrutha Gayathri and Tom Hogue)

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