Having successfully navigated through the turbulent times during the year 2016-17 I amhappy to state that MCX's performance in terms of its business and financial results fromoperations for FY 2017-18 has been satisfactory. We are excited about the opportunitiesthat lie ahead and remain
I committed to encash the same and further improve our overall performance.
I For the year ended March 31 2018 MCX's total income stood at ' 34620 lakh asagainst ' 37587 lakh in FY 2016-17. The decline is primarily due to decrease in treasuryincome. Transaction revenue during FY 2017-18 was ' 23892 lakh a 2.5% increase from '23304 lakh in the previous fiscal despite limited price volatility in many commoditiesfor the major part of the year. On the operational side MCX clocked an average dailyturnover (ADT) of ' 21193 crore (single-side) in futures during FY 2017-18 while the ADT(notional) in the options segment which was launched on October 17 2017 was ' 89 crore.
As a result of continued focus on products and market services MCX could maintain itsleadership position with a market share of 89.58% during the year 2017-18. Likewise yourExchange continued maintaining a high rank among global commodity futures exchanges during2017 occupying the 7th position as per data compiled by Futures Industry Association.
The achievements in the past year give us optimism about our capabilities to tap theopportunities available and address the challenges that lie ahead. During the year2017-18 MCX became India's first exchange to launch commodity Options when it launchedOptions on gold futures on the auspicious day of Dhanteras in 2017. Subsequently Optionson futures of silver crude oil copper and zinc were also launched. The decision made bythe Government of India to substantially reduce transaction tax on exercise of CommodityOptions made trading in the product more attractive.
MCX partnered with Thomson Reuters and launched the Thomson Reuters-MCX India CommodityIndices (iCOMDEX) during the year. We hope to launch contracts on indices once SEBIapproves derivatives on intangibles such as commodity indices.
During last year Multi Commodity Exchange Clearing Corporation Limited (MCXCCL)received an 'in-principle' approval from SEBI for commencing operations. Awell-capitalised clearing entity distinct from the exchange helps in building confidenceof exchange participants particularly institutions having large positions. This wouldenable MCX to attract institutional participants to trade on its platform once permittedby SEBI.
On the participation front the year 2017-18 was a watershed year as severalsignificant regulatory changes were undertaken to bring in new categories of institutionalparticipants in the market. Category III Alternative Investment Funds (AIFs) were allowedto trade. Banks were allowed to become Professional Clearing Members (PCM) while theirsubsidiaries were allowed to offer broking services in commodity derivatives. Brokeragehouses were allowed to integrate their entities across commodities and other asset classesunder a single license. SEBI also floated a discussion paper for enabling participation ofMutual Funds and Portfolio Managers in the commodity derivative markets. We believe thatthe entry of institutional participants will spur retail participation and ease the accessof small stakeholders including the hedgers to the hedging and investment platform ofcommodity exchanges. Besides financial institutions by leveraging on their geographicalreach research expertise and capital strength can enable more efficient price discoveryand take the benefits of the commodity markets to more participants. At the same time weare confident of meeting any challenge thrown up by the possible entry of existing stockexchanges in the commodity space. With our leadership position in products technology andhuman resources we should be able to effectively thwart such possible future challengeswhile at the same time keep exploring the emerging opportunities in the changedregulatory landscape.
The Indian economy is undergoing a number of transformational changes. Various sectorsof the economy are expanding fast. New industries are emerging. Commodity markets as anintegral part of the economy too are expanding in response to the demand for commoditiesand provide a platform for risk management and price discovery of commodities. Thecommodity derivatives market is itself underdoing a metamorphosis with introduction of newproducts and participant categories opening up new vistas of presenting commodities as aninvestible asset class. Together with enabling policy developments such as introductionof GST the scope for expansion of this market is truly large.
MCX is cognizant of the opportunities unfurling in the emerging scenario in India'scommodity markets especially those created by recent policy enablements in the broadercommodity ecosystem. MCX is confident of its capabilities in unlocking thesepossibilities. With a number of new and innovative products stress on continuousimprovement and an established culture of serving its stakeholders your Exchange isaiming at attaining greater heights and achieving the next stage of its growth.
Chairman (DIN: 02726077)
July 20 2018