SEBI notices 66% drop in MCX and NCDEX revenue as traders favored equity market

The Multi Commodity Exchange of India (MCX) and National Commodities and Derivatives Exchange (NCDEX), largest commodity derivatives trading portal in India boasts of over 90% market share.

In October and November, they have noticed a steep drop by 66% in their overall turnover in the lately incepted ‘options’ sector. This is because many traders switched to equities for assured and better returns.

“The turnover of all the options contracts decreased by 66.4% from Rs 466.24 billion in September 2018 to Rs 156.45 billion in October. This was mainly due to a fall in turnover of bullion ‘options’ in October”, stated SEBI in its recent notice released on 26 November.

At the same time, it is interesting to note that the MCX volumes have surged for crude oil options. Moreover, the overall turnover (futures and options) at MCX escalated by 5.3% from Rs. 5.9 trillion in Sept to Rs 6.25 trillion in October. The contribution of options contracts was 2.5%.

MCX provides ‘options’ trading in various non-agricultural commodities such as crude oil, copper, silver and gold among others. NCDEX offers ‘options’ trading in guar seed that witnessed a poor performance since its introduction last year.

SEBI had authorised MCX to introduce ‘options’ trading in gold in October 2017. For a new product, the initial response in the form of high growth volume for options was phenomenal. Later, Liquidity Enhancement Scheme (LES) enabled to brokers resulted in an abrupt rise in turnover (Rs. 465.61 billion) by Sept 2018.

Not put off by the decline in turnover and preference of equities over this new category, experts are positive that with more awareness, opportunities and participants, ‘options’ will see immense growth. Currently, however, the traders