MCX market share falls 10% in 4 months on NSEL crisis

This due to overall fear in commodity futures market erupted out of NSEL's Rs 5,600 payment crisis

Multi Commodity Exchange of India (MCX), the largest but troubled commodity bourse, has lost a little over 10 per cent of market share in the past four months.

This is attributed to general fear in the commodity futures market, in the wake of the Rs 5,600-crore payment crisis at one of its group companies, National Spot Exchange Ltd (NSEL). MCX’s market share was  91.7 per cent in June; it was 81 per cent during October 1-16. Daily average turnover (DAT) in the past four months has fallen from Rs 59,420 crore to Rs 20,930 crore this month. Trade volumes have fallen across all contracts.

The bourse attributes these to issues beyond its control. A commodities transaction tax (CTT) of 0.01 per cent on non-agricultural commodities was imposed with effect from July. Also, the Forward Markets Commission (FMC) raised the margins on bullion, energy and base metals.

Priti Gupta, executive director of Anand Rathi, said, “The unfolding NSEL story has dented sentiment; the overall commodity futures market is seen with a degree of doubt. The increase in margins is also responsible.”

Turnover on the five leading commodity bourses — MCX, NCDEX, ICEX, ACE and NMCE — has fallen by 60 per cent, from Rs 64,830 crore in June to Rs 25,850 crore in October 1-16. However, MCX’s rival bourse, NCDEX, gained in market share, from 5.1 per cent in June to 15.2 per cent in October. It says various recent initiatives — wider range of contracts, lowering of transaction charges and better warehousing — helped this happen. Their DAT rose to Rs 3,932 crore in October from Rs 3,357 crore in June. The market share of NMCE improved slightly to 2.7 per cent from 1.9 per cent (though its DAT fell). The market share of other national exchanges was stable.

“We have undertaken many initiatives in the recent past such as widening its range of contracts, lowering of transaction charges, strengthening of warehousing infrastructure to provide our customers the most comprehensive and cost-effective risk management solution in the Indian commodity market,” said an NCDEX spokesperson.

“It may not be correct to claim that the market share has increased due to its new initiatives, but yes, it should be noted that over all exchange business in terms of volumes and open interest (OI) remained stable despite adverse market situation due to unrelated incidents which proves that NCDEX enjoys market confidence as the most transparent and trusted platform.”