Steep hike in margin makes HFT in crude oil futures unviable

High frequency trading (HFT) in crude oil futures could get impacted as traders will have to cough up a margin 20 times higher to trade a single lot of crude oil futures on the MCX.

This is after the exchange hiked the margin to ₹1.95 lakh. The ₹95,000 is the initial margin and ₹1 lakh is for additional risk. The April 20 debacle, where largely retail traders suffered in the total single-day loss of ₹442 crore, forced the hike in margin.

As per conservative estimates, more than 50 per cent of the trading volume in the commodity market is generated by HFT traders. So far, brokers allowed them to play a single lot of crude oil with an initial margin of just ₹5,000-10,000.