MCX delays shift to new trading platform; shares decline 9% intraday

Shares of MCX, after dropping as much as 8.7 per cent to Rs 1,913, recouped most of its losses to finish at Rs 2,053, down 2.1 per cent over its previous day's close

India’s largest commodity derivative exchange, the Multi-Commodity Exchange (MCX), on Friday said that the markets regulator has halted its planned transition to a new commodity derivative platform (CDP), developed and serviced by Tata Consultancy Services (TCS).

The Securities and Exchange Board of India (Sebi) advised the MCX in a letter dated September 28 to keep its plans of going live with the new CDP in abeyance. 

Following the announcement, MCX shares dropped as much as 8.7 per cent to Rs 1,913, before recovering most of its losses to close at Rs 2,053, down 2.1 per cent from its previous day’s close.

Sebi’s decision followed a letter from the Chennai Financial Markets and Accountability (CFMA) regarding the proposed transition. The CFMA has filed writ petitions on CDP that are currently pending before the Madras High Court. MCX had originally planned to launch the CDP on October 3.

“The regulator has informed that since the matter involves technical issues, the same would be discussed in the Sebi Technical Advisory Committee meeting, which would be held shortly,” the MCX stated in an exchange filing.

The bourse further said it would continue to conduct mock CDP tests pending further directions from Sebi. It had conducted mock trading sessions for 14 hours for seven days without any glitches.

Meanwhile, domestic brokerage HDFC Securities maintains its ‘buy’ call on the MCX stock with a target price of Rs 2,400. It believes that the shift to the new platform will improve margins in the long run.

“The MCX’s profitability was impacted by the higher payout of Rs 140 crore/Rs 330 crore to the technology vendor in FY23/24E, leading to a drop in the Ebitda margin (26/17 per cent in FY23/24E versus nearly 45 per cent average). The shift to the new platform will pivot the cost structure to a higher fixed-cost model. The total cost will decline by 51 per cent in FY25E due to a significant reduction in software support charges,” the brokerage pointed out.

The trading platform used by MCX—which provides critical functions such as trading, clearing and settlements—is currently provided by 63 Moons Technologies, an erstwhile founder-promoter.