Crude oil shock: MCX raises margin to 60% to prevent client defaults

India’s largest commodity derivatives exchanges, the Multi Commodity Exchange (MCX), raised trade margins to as high as 59.12 per cent on Monday to prevent its trading clients from defaulting due to a sharp decline in crude oil prices.

After opening at Rs 3,130 a barrel, crude prices slumped by over 31 per cent to Rs 2,151 a barrel in early Monday trade. Immediately after opening trade on Monday, the commodity hit the lower circuit of six per cent. Trading resumed after a cooling period of 15 minutes, but there was another slump with crude oil hitting the lower circuit of four per cent. The cooling period and lower circuit alternated during the first two hours of trade till the cumulative decline reached 31.27 per cent.