The Indian economy is the fifth strongest in the world. This shows that our financial markets have a strong hold among other countries. But the stocks and securities markets aren’t the only ones successfully established in the economy. Indian Stock Markets deal in the shares of various entities. Similarly there exists a commodity market to trade commodity futures by its participants.
The Multi Commodity Exchange or (MCX) is India’s commodity exchange centre that conducts trade on a day to day basis between members using its in house market operations. In the quarter ending June 2017, the MCX had a turnover of a value of 12.01 Trillion Rupees. This is the reason MCX is the largest commodity exchange in the country.
Meaning of MCX
Multi commodity exchange (MCX), as the name suggests is an exchange just like BSE and NSE. It is an Indian based independent commodity market. Established in the year 2003 under the regulatory framework ofForward Markets Commission FMC, it is situated at the country’s financial capital Mumbai, Maharashtra. In 2015, FMC merged with SEBI therefore putting MCX under the regulatory purview of the same. MCX is a platform that facilities online trading of commodities, settlement and clearing of transactions and hence providing a platform for risk management or hedging.
Who Can Become the Members of MCX?
The aforementioned entities can become a member of the MCX.
- Individuals/Sole Proprietorship Firms
- Registered Partnership Firms
- Hindu Undivided Families
- Private Limited Companies
- Public Limited Companies
- Co-operative Societies
Name Restrictions of the Entities:
The entities applying for membership with the MCX cannot consist the terms Comdex, Comex, Exchange,Stocks, Securities, Shares, Forex, or any words of similar nature to these.
Categories of Membership at MCX:
There are five categories of members at the MCX
- Trading-cum-Clearing Member (Deposit Based)
- Trading-cum-Clearing Member (Non-Deposit Based)
- Professional Clearing Member
- Institutional Trading-cum-Clearing Member
- Trading Member
What are the Commodities that are traded in MCX?
The MCX facilitates futures trading in bullion, non-ferrous metals, energy, and a number of agricultural commodities.
The following types of commodities are traded on MCX:
- Gold Mini
- Gold Petal
- Gold Guinea
- Gold Petal (New Delhi)
- Gold Global
- Silver Mini
- Silver Micro
- Silver 1000
- Base Metals
- Aluminium Mini
- Copper Mini
- Lead Mini
- Nickel Mini
- Zinc Mini
- Agro Commodities
- Crude Palm oil
- Mentha Oil
- Crude Oil
- Crude Oil Mini
- Brent Crude oil
- Natural Gas
Market Operations at MCX
The MCX conducts four market operations through in house departments in order to run its trading and exchange platforms smoothly from the process of placing orders to its delivery.
- Trading and Surveillance:
Members of MCX use the Trading Work Station in order to conduct trading operations. The Trading Work Station is a platform to place and execute orders.
- Clearing and Settlement:
An in-house clearing house monitors the processes related to delivery, settlements and margins.
The MCX delivery department looks after the delivery and settlement of the commodities. This department facilitates delivery related documentation.
- Warehousing and Logistics:
The warehousing and logistics division caters to exchange members and their need to store goods and deliver them through the exchange platform.
Determination of Spot Prices on MCX
Price quotes are obtained from various participants in the market and the value chain of various levels such as farmers, grader, miller, auctioneer, etc. Then the outliers are eliminated, which results in the prices to be circulated. The said spot price is used to settle derivative contracts in the MCX.
The commodity market is as lucrative as the share market. Just like the BSE and NSE, MCX has its own index that helps interested members keep a watch on fluctuating prices. The rates of commodities are easily affected by factors such as political situations, natural calamities, government policies etc. This shows how similar the stocks and commodity markets are.
At Indira Trade, we strive to bring the best articles to keep our readers up to date when it comes to the Indian economy. We hope that our articles help in building successful traders and knowledgeable students. Our articles are educational and easy to understand, take for an example our article “What is Short Selling?”