MCX plans to launch shorter contracts

MCX is one of four Sebi-recognized national exchanges that runs the largest commodity derivatives segment (CDS), accounting for around 98% market share. Other exchanges offering a CDS include NSE-anchored NCDEX, NSE and BSE. “With Sebi approval for the go-live date in, the exchange can now launch index options and shorter duration contracts on benchmark gold and silver contracts. This could have a positive impact on the exchange turnover as and when the plans are implemented,” a person aware of the matter said.

Currently, MCX offers bi-monthly futures contracts on 1 kg gold and 30 kg silver. It offers gold and silver contracts in smaller denominations as well, but the bigger ones attract the largest volumes. A second person said that though MCX had sought and received Sebi approval for the shorter duration contracts, the bourse would once again approach the market regulator for the same. The approval for index options will be sought after the shorter duration futures contracts.

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“Once trading on the new platform stabilizes, the exchange will look at launching shorter duration futures contracts on the benchmark gold and silver contracts to begin with, and then consider options on indices like Bulldex and Metldex,” he added.

Bulldex is the bullion index and Metldex is the base metals index. These are akin to Bank Nifty and Nifty indices, which also have weekly options on them.

A query sent to an MCX official remained unanswered.

Options in India have higher market share than futures, and the MCX step could dramatically increase exchange turnover. To put things in context, on NSE, the country’s largest stock exchange, index options enjoy 98% market share in derivatives with turnover of ₹37,380.7 trillion posted so far this fiscal.

MCX had an eight-year contract with 63 Moons for a CDS, which expired in September last year. In 2021, it selected TCS as its new vendor, which was asked to implement a commodity derivatives platform before September 2022. However, due to persistent delays, the migration kept getting deferred. The latest extension of contract with the old vendor was for six months ending in December 2023. However, MCX finally announced last month it was ready to migrate to the TCS platform and the Sebi approved the go-live date earlier this week.

The MCX stock has risen 70% from a 52-week low of ₹1,285.05 on 22 May to a 52-week high of ₹2,179.45 on 11 October. It closed at ₹2109.95 on 13 October.

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Updated: 14 Oct 2023, 12:14 AM IST