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Oil market participants may face discrimination due to use of robots in on-exchange trading in high demand periods: FAS and Bank of Russia explain

15 October 2021
Press release

At a meeting of the Exchange Committee of the Federal Antimonopoly Service (FAS) of Russia, the regulators drew the attention of trading participants to the unfair practice of using special automated trading systems —— robots —— to make purchase/sale bids for petroleum products in the spot market.

The regulators have found signs suggesting that some participants are using robots during periods of high demand.

Such robots allow trading participants to act systemically by a similar algorithm with a predetermined behavioural mechanism and criteria: purchase bids are made at the exchange with an increase in the price and in a short period of time in relation to the bid that another trading participant has previously made. Thanks to this arrangement, such a trading behaviour model allows robot-enabled bids to top in the list of orders and puts the participant in the driver’s seat to buy to commodity in the exchange market of petroleum products.

The regulators note that the very use of robots does not contradict Russian legislation. However, a key operating principle is non-discriminatory and equal access of legal entities and individual entrepreneurs to on-exchange commodity trading. The established circumstances of the use of robots create discriminatory conditions for bona fide participants.

The FAS of Russia, and the Bank of Russia recommend that trade organisers in the petroleum product market update their internal documents to specify procedures for identifying the use of robots, and develop a list of measures to discourage unfair practices. Such measures, the regulators believe, may include warnings, fines, suspended access and disconnection from trading with the disclosure of misconduct details.

The meeting of the Board of the Petroleum Products Section of JSC SPIMEX discussed the issue of applying disciplinary measures against bidders using robots to make bids in trading systems. Members of the Board of the Petroleum Products Section made a consensus decision to recommend that JSC SPIMEX take disciplinary measures.

As a result, JSC SPIMEX issued warnings to several trading participants*.

* At the initial stage, these participants included LLC InvestNefteTrade, LLC KD-Oil, LLC ATI, LLC TK YugNefteProduct, and LLC Alfa-Tek.

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