MCX turnover rises on high volatility in non-agri commodities

Volatility in non-agri commodities helps daily average turnover soar

The Multi Commodity Exchange (MCX), India’s largest commodity derivatives trading platform, has reported a steep 57 per cent increase in its daily average turnover (DAT) in November on huge price volatility in non-agriculture commodities, where the exchange has a dominant position.

MCX reported a DAT of Rs 23,268 crore in November this year, as against Rs 14,809 crore in the comparable month last year. Total exchange turnover also moved significantly up to Rs 4,65,351.5 crore in November 2014 against Rs 3,99,831.7 crore in the same month last year.

Traders’ risk appetite grew due to sudden spurt in volatility in gold, silver, crude oil and base metals. Members of the commodity eco-system suddenly became active in November to hedge their risk in futures market to ensure the availability of commodity in futures at the time of their needs. In the last one month, there has been huge volatility in the non-agri space, which has caused renewed interest in futures trading among traders.

“Such developments are instances of re-confirmation of trust in the exchange and its management team, coupled with the confidence of participants in the robustness of our trading systems. We will continue to focus on supplementing our efforts in broadening the market and improving its working,” said P K Singhal, joint managing director of MCX.

Since the government introduced commodity transaction tax in July 2013, the exchange turnover declined sharply. Trading sentiment was also weak due to Rs 5,600-crore payment default by the National Spot Exchange Limited (NSEL) last year.

Interestingly, bullion price remained volatile amid expectation of massive buying by central banks. The Swiss government proposed to buy 1,640 tonnes of gold from open market.

But, in the absence of any further supportive factors, gold slipped to $1,146 an oz on Friday and rebounded on Monday to trade at $1,205 an oz, due to fresh booking from stockists. Silver followed the suit and traded between $16.55 and $14.55 an oz. On the MCX, gold was traded between Rs 26,883 per 10 g and Rs 25,164 per 10 g in the last month.

Crude oil had another reason to remain volatile. Earlier, the Organisation of Petroleum Exporting Countries, an intergovernmental group controlling crude oil prices, announced that it would meet in Vienna for taking a final decision on production cut. Amid widespread estimates of production cut, crude oil slipped to $68.99 a barrel from $83.55 a barrel in the beginning of November.

Following that crude oil was traded between Rs 5,015 per barrel and Rs 4,192 per barrel on the MCX.

Copper led the base metals’ volatility on fears of fluctuating economic data from the United States, China and the European Union.

The renewed traders’ interest in non-agri commodities resulted in an increase in the MCX market share significantly to 87 per cent in November from 76.6 per cent in the corresponding month last year.

“MCX has seen its turnover improve due to huge volatility in non-agri commodity prices in the last one month, which has caused renewed interest in participation from traders,” said Naveen Mathur, associate director of commodities and currencies at Angel Broking.

By contrast, National Commodity & Derivatives Exchange (NCDEX) witnessed a sharp decline in its DAT. The average turnover of NCDEX fell by 12.2 per cent in a year to Rs 3,249 crore. Thus, the exchange saw its market share falling to 12.1 per cent in November 2014 against 18.7 per cent in the corresponding month previous year.

The two national level exchanges contribute over 99 per cent of the overall trade in commodity futures. Other national commodity exchanges, including National Multi Commodity Exchange (NMCE) and Ace Derivatives and Commodity Exchange, reported its market share at 0.9 per cent in the month under review, a sharp decline from 3.6 per cent in November last year.