Better days for MCX ahead as volumes see upswing

Exchange also likely to see an increase in its income

The Multi Commodity Exchange (MCX) seems to be on a revival path, though still without a regular chief executive.

The only listed exchange in commodity futures, it has started to see its volumes stabilise in the December quarter. This was after a setback due to imposition of a commodities transaction tax (CTT) and a regulatory muddle in the aftermath of the National Spot Exchange scam and the latter’s promoter, Financial Technologies, exiting.

December was the first quarter after entry of several new investors, including Rakesh JunJunwala and Kotak Mahindra Bank.

The exchange will also see an increase in its income, following rising volumes. Its total volume in the December quarter was Rs 484,672 crore, up 11.7 per cent from the quarter ending December 2013. Income from transaction fees will also increase to that extent, being Rs 334 for every Rs 1 crore volume on both sides.

“Daily volumes have more or less managed to stabilise around Rs 22,000 crore, compared to Rs 17,000 crore last year. The company has managed to maintain volumes despite the fall in commodity prices,” said an analyst, on condition of anonymity.

The company has been without a managing director and chief executive officer for three quarters. Several senior executives have left in this period. It is being run by joint managing director P K Singhal.

Reviving the confidence of market participants has helped revive its market share. Prior to imposition of CTT, its market share was 91.32 per cent, which went down to 76.4 per cent in December 2013. It was 85 per cent in the quarter ended December.

Gold and crude oil, the two topmost traded commodities on the exchange, have seen a huge amount of volatility in the past quarter and played a key role in the December quarter performance. After almost two years, the exchange launched a new contract, in mini crude oil, on Tuesday.

Crude oil in the past quarter had almost doubled to 7.9 million lots, compared to four million lots in the same period a year before. Gold saw a decline from 1.1 million lots last year to 967,701 lots in this December quarter.