MCX slips 9% as Sebi stops launch of new commodity derivative platform

Sebi has asked MCX to put on hold the proposed plan to launch its new commodity derivatives platform (CDP) planned for next week

Shares of the Multi Commodity Exchange (MCX) slipped 9 per cent to Rs 1,914.60 on the BSE in Friday's intraday trade on profit booking after markets regulator Securities and Exchange Board of India (Sebi) asked the company to put on hold the proposed plan to launch its new commodity derivatives platform (CDP) planned for next week.

The stock had hit a 52-week high of Rs 2,119.60on Thursday, surging 10 per cent intraday, after MCX announced that the Exchange will go live with the new CDP with effect from Tuesday, October 03, 2023.

It was quoting close to its record high level of Rs 2,134.90, touched on October 14, 2021. That said, despite today's fall, the market price of MCX has outperformed the market in the past one month by surging 20 per cent as against 0.95 per cent gain in the S&P BSE Sensex. In the past one year, the stock has zoomed 63 per cent as compared to 16 per cent rally in the benchmark index.

In an exchange filing, MCX announced today that Sebi has, vide email dated September 28, 2023, forwarded a copy of the letter dated September 27, 2023 from Chennai Financial Markets and Accountability (CFMA) regarding CDP. It may be noted that writ petitions filed by CFMA on CDP is pending before the Madras High Court for disposal.

"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," MCX said.

Thus, Sebi has advised the Exchange to keep the proposed Go-Live of CDP in abeyance. As the Exchange is ready and keen to go-live as soon as permitted, the Exchange will continue to conduct CDP mock tests till further directions in the matter from Sebi (are received), MCX said. READ HERE

Meanwhile, analysts at HDFC Securities maintain 'buy' rating on MCX with a target price of Rs 2,400 per share.

"MCX has witnessed impressive growth in options volume but uncertainty around the technology shift has been the key overhang. The commodity exchange, in a press release, has indicated that the technology shift is underway and might happen three months ahead of the deadline. In the last seven days, MCX has conducted mock trading sessions for 14 hours without any glitches," the brokerage firm said in a stock update.

The brokerage believes that post the technology transition, investor focus will shift to product launches, volume growth, and improving profitability. Options notional aerage daily trading volume (ADTV) has increased ~3x YoY and is currently more than Rs 1 trillion (~5x of futures). Options growth is driven by a surge in active unique client codes (UCCs) (+126% YoY), and higher activity in crude/natural gas contracts.

The launch of new products like index and mini/weekly options will further boost volumes. The options premium-to-notional ratio will decline gradually but the premium volume will register ~47 per cent CAGR over FY23-26E, it added.