MCX : Poised For A Big Leap Ahead
Dalal Street Investment Journal|August 02, 2021
India is one of the world’s leading producers or consumers of various commodities. The initiatives undertaken by SEBI have the potential to catapult the Indian commodity derivatives market into the league of the most influential markets on the global map. And that is why Multi Commodity Exchange of India Limited (MCX) is all set to post a high score

Multi Commodity Exchange of India Limited (MCX) is India’s first listed exchange, a state-of-the-art commodity derivatives exchange which facilitates online trading of commodity derivatives transactions, thereby making available a platform for price discovery and risk management. The exchange started operations in November 2003 and operates under the regulatory framework of the Securities and Exchange Board of India (SEBI). The last two decades have seen extraordinary change in the way we live our lives and in the role of technology in shaping our world. MCX has been a part of this unfolding story from the start.

It is an independent Indian government-owned commodity exchange based in India. MCX makes its way under the ownership of Ministry of Finance, Government of India. The average daily turnover of commodity futures contracts increased by 26 per cent to ₹32,424 crore during FY 2019-20 as against ₹25,648 crore in FY 2018-19. The total turnover of commodity futures traded on the exchange stood at ₹83.98 lakh crore in FY 2019-20. MCX offers options trading in gold and futures trading in nonferrous metals, bullion, energy and a number of agricultural commodities such as mentha oil, cardamom, crude palm oil, cotton and others.

Commodity Derivative Market

Commodity derivatives are important for all major businesses and corporates to manage price risks. This contributes towards enhancing the market competitiveness of an economy and is therefore an important pillar in the financial landscape of any major economy. India is one of the world’s leading producers or consumers of various commodities. The initiatives undertaken by SEBI have the potential to catapult the Indian commodity derivatives market into the league of the most influential markets on the global map. Commodities witnessed a turbulent 2020. Gold reached new all-time highs while the cyclical markets hit deep crisis troughs from which they are still recovering.

Nearly all commodity prices rose in Q1CY21, continuing the marked rebound since mid-2020. Further, almost all commodity prices are beyond their pre-pandemic levels and those of some commodities, notably metals, are well above their previous levels—copper prices were nearly 50 per cent higher in March 2021 relative to the end of 2019. The recovery can be traced on the back of the improving global economic outlook, aided by significant monetary and fiscal stimulus in advanced economies and steady, although uneven, vaccination rates. In recent times, the tiffover oil production and China’s new policy on base metals were some of the factors that impacted the commodity markets across the globe.

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