New Era of Options Trading Ringing Bell at MCX

September 28, 2016

Author: Bappaditta Jana

SEBI chief U.K Sinha met the finance ministry officers to discuss the measure to strengthen the commodity markets. This includes launching of new products namely commodity options and commodity exchanges.

What changes can We Expect to See?

To take Commodities Derivatives Market to the level of Securities Market.
To introduce new products and new categories of market participants in the space.
To introduce options trading in the Commodity future segment.
Allowing banks, mutual funds, AIFs, foreign hedgers in the space.
Single licence for Commodity and Equity Brokers.

The products of the commodity exchanges are widely divided into two categories- agri and non-agri. The agri products include sugar, soya, rice etc., and the non-agri commodities include precious metal like gold and silver along with crude and other base metals like copper, nickel etc.The Indian commodity market is dominated by the multi commodity exchange which has a market share of 85 per cent. MCX has a professional management which runs the day to day operations and is all set to gain from the new trust given by the SEBI to broaden the commodity segment. There has been a positive change in the fundamentals as they have announced a 24 per cent increase in the transaction cost. Transaction costs amounting to a total of Rs 203 crore revenue for the company in the financial year 2016. A 24 per cent increment will lead to additional revenue of more than Rs 50 crore, as generation of more revenue is expected to be generated as option trading starts by the end of the third quarter.MCX share price has outperformed the benchmark index of NSE, as it has gone up by 25 per cent in this financial year compared to a 10 per cent jump in the Nifty share price.Interestingly there are further challenges as BSE is waiting for a nod to setup a commodity exchange and NSE also has a subsidiary company NCDEX that runs a commodity exchange which is a market leader in agri commodity trading.However going forwards as the market depth and the liquidity increases, MCX has room and the first mover advantage to capitalize in the growing option space.MCX is one of the Top 500 shares identified by Dynamic Levels. Dynamic Levels has the best methodology of filtering the best stocks with a combination of fundamental and technical analysis which brings out the strongest stocks that can best return in the future.MCX share price has touched a 52 week high of Rs 1,202.50 in today’s session by rising 2.43 per cent intraday.