MCX Live Price / Rate

Investing in commodities isn’t a new investment avenue. The commodity market has always been an important economic segment since ancient times. Initially, there was no regulation in the commodity market, and hence there were failed transactions and a lack of transparency.

Therefore there was a need for some regulatory framework to regulate transactions in the commodity market and to stop fraudulent practices.

Multicommodity exchange of India Ltd. (MCX) came into existence in 2003 as an independent exchange to trade in commodity and its derivatives. It is one of the largest commodity exchanges in India. It is based in Mumbai. Earlier, MCX was governed by the Forward Market Commission (FMC). In 2015, FMC was merged with SEBI, and since then the MCX is regulated by SEBI.

Like shares and Share derivatives in share, market are bought and sold on stock exchanges, i.e., BSE and NSE in India; commodities and its derivatives are sold and purchased on MCX. The working hours of MCX are different from the stock exchange. The MCX opens from 9 am to 11:30 pm IST Monday through Friday.

Like any other market, prices in the commodity market to are driven by supply and demand forces. More demand pushes the price of a to a higher side and vice versa. This fluctuation in prices makes people trade in the commodity to manage their risk or to earn some profit by speculating the movement in prices.

To make the trade mechanism more transparent, a web-based application COMRIS (Commodity Receipts Information System) has set up by the exchange.

This web-based application system assists in maintaining the electronic record of all the commodities deposited at the exchange accredited warehouses and also ensures a flow of real-time information from the warehouses.

MCX India provides the live feed of all the trades of the commodities, and these are published across various websites to facilitate the trades among traders.

In 2017, MCX had entered into a partnership with Thomson Reuters and had developed India’s first co-branded commodity index series, iCOMDEX. This series consists of iCOMDEX Composite, iCOMDEX gold, iCOMDEX bullion, iCOMDEX base metals, iCOMDEX Copper, iCOMDEX Crude Oil.

MCX came out with its Initial Public Offerings (IPO) in 2012. Nearly 6 million shares were offered to the public within the price band of Rs. 860 to Rs. 1032 per equity share. The face value of each share was Rs. 10, and the IPO was made to raise nearly $134 million.

This IPO was first ever IPO by the Indian exchange, and then MCX was the only publicly listed exchange of India.

Commodities that are traded in MCX are divided into two broad categories:

• Hard Commodities -  Natural resources that have to be mined like gold, silver, and other precious metals, oil, and other natural resources.
• Soft Commodities - Agro-based commodities such as Black Pepper, Cardamom, Castor Seed, Cotton, and other natural agro products.

Trading on MCX takes place in the form of standardized contracts. The trader trading in commodities has to sign a contract that specifies the size of the trade, delivery, and the maturity date.

The range of commodities that are traded on MCX includes:

• Base Metal: Aluminium, Aluminium Mini, Brass, Copper, Copper Mini, Lead, Lead Mini, Nickel, Nickel Mini, Zinc, Zinc Mini.
• Bullion: Gold, Gold Mini, Gold Guinea, Gold Petal, Silver, Silver Mini, Silver Micro, Silver 1000.
• Energy: Crude Oil, Crude Oil Mini, Natural Gas
• Agro-Commodities: Black Pepper, Cardamom, Castor Seed, Cotton, Crude Palm Oil, Mentha Oil, RBD Palmolein, Rubber.

There are two types of traders in the commodity market:

• The institutional or commercial user o
• Speculators

The commercial users are those traders who have entered into the commodity trading market to hedge their open positions and not to book gains by such trading. They came into commodity markets to hedge the risk due to the fluctuation in the prices.

On the other hand, speculators are the traders who entered in the commodity market purely with a motive of making speculative gains. They do not wish to hold the contracts until maturity. They square off the positions if the trade moves as per their speculation and book gain from it.

MCX acts as a middleman between two parties, i.e., buyer and seller, and ensures there is no default risk.

Investment options on MCX include:

• The future market for the commodity (delivery as well as cash transactions)
• Commodity Stocks
• Commodity-based mutual funds and exchange-traded funds

MCX has tremendously promoted the commodities market in India. It has provided liquidity to the market by introducing new contracts and enhancing the volume and market depth.

Recently MCX has introduced Option trading. The news of the introduction of options in the commodity market was in the market as a rumor for long, recently on Diwali in 2017, after receiving all clearance from SEBI, MCX has finally introduced the options trading.

This bold step by MCX will enhance the liquidity and volume in the commodity market manifold.

However, these options trading will be different from the regular options trading in the stock market. The difference between both is the underlying asset for the options trading. In the stock market where the underlying asset for the option is the spot price of the asset, it will not be the case in commodity trading.

In commodity trading, for trading in option, the underlying asset will be the futures of the commodity because the market is mostly virtual. These options in commodity trading will not be just derivative but derivatives of derivatives.

Example:

If you buy options on the Nifty Index, then the underlying is the spot price for the Nifty Index.

Now consider buying an option for crude oil. What will be underlying in this case? As we do not have a spot market for commodities in India, but we do have a vibrant futures market, so the underlying for the options on crude oil will be the future of the crude oil.

Another difference between the options on shares and options on commodity will be the settlement procedure. Since settlement in commodities is allowed in physical deliveries of the assets too so, this will be applicable for option trading also.

The two types of options that are available will be- Call and put.

The introduction of the option has added a new chapter in the books of MCX.