Multi Commodity Exchange (MCX), India’s largest commodity derivatives trading platform, has reported a steep 57% increase in its daily average turnover (DAT) in November on huge volatility in non-agri commodities where the exchange has a dominant position.
MCX reported a DAT of Rs 23268 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 465,351.5 crore in November 2014 versus Rs 399831.7 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 amongst 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 MD of MCX.
Since, the government introduced commodity transaction tax (CTT) in July 2013, exchange turnover declined sharply. Trading sentiment was also weak due to Rs 5600 crore payment default by National Spot Exchange Ltd (NSEL) last year.
Interestingly, bullion price remained volatile amid expectations of huge quantity buying by the Central banks led by Switzerland. Through public voting post referendum, the Swiss government proposed to buy 1640 tonnes of gold from open market which gave an impression that the Swiss will approve it. Gold price, thus, moved up to $1185 an oz before Swiss voting on referendum.
But in absence of any further supportive factors, gold slipped to $1146 an oz on Friday and rebounded again on Monday to trade at $1205 an oz due to fresh booking from stockists. Silver followed suit and traded between $16.55 and $14.55 an oz.
On the MCX, gold remained traded between Rs 26,883 per ten grams and Rs 25164 per 10 grams in the last one month.
Crude oil had another reason to remain volatile. Earlier, the Organisation of Petroleum Exporting Countries, the intergovernmental organization for controlling crude oil prices, announced that it would meet in Vienna for taking a final decision on a 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 5015 per barrel and Rs 4192 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 into an increase in MCX market share significantly to 87% in November from 76.6% 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, a city based broking firm.
By contrast, National Commodity & Derivatives Exchange witnessed a sharp declined in its DAT. The average turnover of NCDEX fell by 12.2% in a year to Rs 3249 crore. Thus, the exchange saw its market share falling to 12.1% in November 2014 against 18.7% in the corresponding month previous year.
The two national level exchanges contribute over 99% of the overall trade in commodity futures. Other national commodity exchanges including National Multi Commodity Exchange (NMCE) and Ace Derivatives and Commodity Exchange (Ace), reported its market share at 0.9% in the month under review, a sharp decline from 3.6% in November last year.
Commodities Exchanges Turnover & % Share
(Monthly Turnover in Rs. /Cr)
Date MCX Turnover NCDEX Turnover
Nov-13 399831.73 96249.65
Dec-13 433896.69 104549.87
Jan-14 518780.56 98881.34
Feb-14 482327.78 85982.25
Mar-14 484003.5 113149.82
Apr-14 377325.11 79416.62
May-14 397780.48 80937.15
Jun-14 401682.71 92834.51
Jul-14 443167.31 99911.9
Aug-14 361993.24 70276.6
Sep-14 445989.47 83519.14
Oct-14 398425.19 66197.88
Nov-14 465351.52 64980.58
Dec-14 45452.29 6477.02