Sept 28 (Reuters) - U.S. futures regulator said on Tuesday online brokerage Interactive Brokers LLC had agreed to pay a penalty of $1.75 million to settle charges over its failure to "adequately" prepare its electronic trading system before last year's historic oil plunge.

The problem was discovered on April 20 last year when negative oil futures prices were not displayed to customers, who were also unable to place limit orders to buy or sell, the Commodity Futures Trading Commission (CFTC) said.

The regulator also said it had reduced the penalty due to "substantial cooperation and systems remediation" by Interactive Brokers.

"This enforcement action demonstrates that the CFTC will hold registrants responsible for their handling of customer accounts," Acting Director of Enforcement Vincent McGonagle said in a statement.

On April 20, U.S. crude futures turned negative for the first time in history, crushed by a collapse in oil demand as the COVID-19 pandemic derailed the global economy.

(Reporting by Niket Nishant in Bengaluru; Editing by Vinay Dwivedi)