International Journal of Research in Engineering, Science and Management 178

Volume 4, Issue 11, November 2021

https://www.ijresm.com | ISSN (Online): 2581-5792

A Study On Performance of Multi Commodity

Exchange of India Limited
R. Sushma1*, B. N. Shubha2
1
Assistant Professor, Department of Management Studies & Research Centre, B.M.S. College of Engineering,
Bangalore, India
2
Professor, Department of Management Studies & Research Centre, B.M.S. College of Engineering, Bangalore, India

Abstract: The commodity derivative market is believed to exist management and optimal portfolio selection. Volatility is
in India for over 100 years. Over two decades, commodity futures associated with uncertainty or risk in portfolio value. Higher
have become a popular class for portfolio investors. At present, volatility, higher portfolio value and lower volatility, lower the
about five National Commodity Exchange are contributing
towards the development of the market under the valve of the fluctuations in portfolio value even though it changes over time.
Securities and Exchange Board of India (SEBI). The commodity The commodity market has been sophisticated every day. The
market in India facilitates these exchanges domestically and future price depends on the availability of information. A small
globally based on the requirements for the development of the price change may have a large effect on trading. Hence, there
economy. The leading Multi commodity exchange of India are many analysts and researchers increasing interest in
currently holds a market share of 92.6% as of September 2021-22, volatility in derivatives especially commodity markets.
with 1,19,941 crores of daily turnover since inception and ranked
as 7th position with 33% YOY change in commodity options and
futures contracts traded in 2019 as recorded in World Federation 2. Objectives of the Study
of Exchanges. MCX is currently working towards the requirement  To examine the development of Multi Commodity
of different market participants by providing innovative products
Exchange of India Limited.
and services. This research paper is an attempt to understand the
development and performance of Multi commodity exchange since  To analyse the performance of Multi Commodity
its inception. Exchanges of Indian Limited.

Keywords: Commodity market, Commodity exchange, Multi 3. Review of Literature

commodity exchange.
Golak Nath, Manoj Dalvi, Vardhana Pawaskar, Sahana
1. Introduction Rajaram & Manoel Pacheco (2019) The effectiveness and price
discovery in the Indian gold futures market are investigated in
A commodity futures exchange is an electronic platform
this research. To establish the direction of information flow
where sellers and buyers transact on derivative contracts in an between these markets, the link between domestic and
organized way. These transactions are transparent bringing
international spot prices and gold futures prices is investigated.
together many sellers and buyers from across the country who
The microstructure of the market and the impact of different
trade in a very transparent manner to arrive at an efficient price. policy shifts on India's gold market are investigated. The futures
These exchanges promote trade in ‘standardized’ quality
and domestic spot markets have a long-run co-integrating
products. Most commodity markets across the world trade in
connection. The daily price discovery occurs in the futures
raw materials. The major participants in these markets are market, although not in the spot market, according to our
farmers, traders, exporters, processors etc. and investors. All
findings. Futures are ineffective as a hedge against domestic
these participants come to the exchange platform for managing spot prices. We used the relatively close gold futures contracts
the price risks that arise when one trades in the future.
offered on the MCX, which are the most liquidity in terms of
The difference between a commodity exchange and a typical
trading volumes, for our analysis. Trading that lasts longer than
wholesale or terminal market is that exchange creates a a month is considered illiquid and is therefore excluded from
transparent organized mechanism for arriving at an efficient
the analysis. The MCX spot price is thought to be indicative of
price on the exchange platform; whereas, in a wholesale market domestic spot pricing, whereas the WGC spot price is thought
the prices are negotiated between buyers and sellers. In India,
to be representative of global market prices. For the analysis,
the Securities and Exchange Board of India (SEBI) regulate all
the natural logarithm of all variables was used. The information
commodity derivative exchanges. In the derivatives market, was gathered from January 2008 to March 2018. The goal of
volatility is associated with big signs in either direction. It plays
this research was to investigate the microstructure of the Indian
an important role in commodity pricing, hedging, risk
gold market as well as policy changes. Across numerous
*Corresponding author: rsushma.mba@bmsce.ac.in
R. Sushma et al. International Journal of Research in Engineering, Science and Management, VOL. 4, NO. 11, NOVEMBER 2021 179

political regimes, the study experimentally checks for gold indicative of price fluctuations in the spot/futures market as a
futures efficient markets and determines the direction of the whole because it is derived using real-time prices of exchange
flow of information between the spot and futures markets. traded commodities/futures. Our data sample includes the
Kirithiga, S. Naresh, G, Thiyagarajan, S (2018) Investing in MCX's multi-commodity spot and futures indexes, as well as
gold and silver has traditionally been thought to be a safer bet; the NCDEX's agricultural commodities spot and futures
yet, as risk concerns have increased in recent years, so has an indexes and global index values. The sample period is from
interest in these bullion commodities. The price, return, and June 2005 to September 2007. Adjusting the estimation to
volatility criteria are frequently used to choose whether to become robust to heteroscedasticity of the returns data is
invest in an asset. The unpredictability of any individual another type of improvement. Indian commodity/futures
investment determines its risk. Exchange-traded derivatives can indices are notional indices, it should be highlighted. Each
efficiently handle high volatility risks, and bullion futures index, however, is indicative of price fluctuations in the
contracts come in a variety of sizes to meet the needs of spot/futures market because it is derived using real-time prices
different bullion investors. The daily spot and futures prices of of exchange-traded commodities/futures.
all available gold and silver contracts were gathered from the Prabina Rajib (2015) Though the agricultural industry
multi-commodity exchange (MCX) over ten years from 2006 to significantly contributes to the Indian economy, it is hampered
2015 to investigate the influence of volatility in setting bullion by several barriers, one of which is outmoded agricultural
prices. The errors made in modelling returns are measured by marketing and price discovery rules, which result in low price
volatility, which may be recorded using methods like realization by Indian farmers. Six national-level exchanges in
autoregressive conditional heteroskedasticity (ARCH) and India offer commodities futures contracts, with several also
generalised autoregressive conditional heteroskedasticity offering electronic spot exchanges to assist spot commodities
(GARCH). In all sizes of contracts for gold and silver, the trading. Farmers, on the other hand, have been
analysis demonstrates that the previous day's return information underrepresented in these trades. ITC-ABD, one of India's
effects today's return volatility. As a result, the study suggests leading Agri-commodity aggregators and exporters, has begun
that, while commodity spot prices collect information from to use these exchange platforms to hedge price risk. Mr S.
futures prices, volatility data has little impact on the two. Sivakumar has over three decades of expertise in the agriculture
Shashi Gupta, Himanshu Choudhary, D. R. Agarwal (2018) sector and has a thorough understanding of commodity markets
The purpose of this paper is to explore the long-term economic and the demands of Indian farmers. This interview attempts to
efficiency and price discovery in the Indian commodity futures gain an understanding of his thoughts on growing farmers'
market experimentally. Two agricultural commodities, two involvement in commodity derivatives trading, as well as ITC-
industrial commodities, two precious metals, and two energy commodity ABD's hedging approach.
commodities were used in the research. The spot and futures Shree Bhagwat, Angad Singh Singh (2015) Commodities
market time series are analyzed using advanced statistical futures trading in India has a long and illustrious history; India's
approaches such as restricted cointegration and the vector error first commodity market, the Bombay Cotton Trade Association,
correction model (VECM). The limited cointegration test was founded in 1875. The bullion futures market first appeared
indicates that all commodity' near-month futures prices are co - in Mumbai in 1920. There are presently 22 recognized
integrated with spot prices, but that futures prices are commodities exchanges in India, with six national-level
ineffective at predicting future spot prices. The null hypothesis electronic multi-commodity exchanges: NMCE
of effectiveness and unbiasedness is rejected for all eight (Ahemadabad); MCX (Mumbai); NCDEX (Mumbai); ICEX
commodity markets in the Indian commodity futures market, (Mumbai); ACE (Ahemadabad); and UCX (Ahemadabad)
which is evidenced as the low volatility market (Kumar & (Mumbai). The purpose of this article is to look into the
Pandey, 2013, Journal of Indian Business Research, 5(2), 101– structure and performance of commodities exchanges in India.
121). This confirms the result of Fortenbery and Zapata. Short- MCX is the world's largest commodities futures exchange for
term inefficiencies and bias are confirmed by the statistically Silver, Gold, and Crude Oil. During the Financial Year 2013-
significant value of prior spot and futures prices. Commodity 14, national exchanges accounted for 99.72 per cent of the
futures are the most essential indication of commodity price turnover of commodities futures contracts traded in India. In
changes, according to the considerable value of the error 2013-14, MCX had an 84.89 per cent market share on its own.
correction term (ECT) of futures prices. The current investigation is based on analytic and descriptive
Sushismita Bose (2017) Given the large volumes of research. Because of the high turnover and year-to-year
commodity futures trading and their involvement in the fluctuations in values, no tool is used. Volatility in commodity
portfolios of a wide range of investors, commodity futures are pricing has always been a key source of concern for both
treated here as a financial product comparable to equities producers and consumers. Two-thirds of India's one-billion-
futures. As a result, we look at the patterns in the inter strong population is reliant on agricultural products.
calculated by the two national multi-commodity exchanges. On Commodity futures markets are an important aspect of any
these exchanges, futures contracts are exchanged electronically. agricultural liberalization plan.
This should be emphasized that Indian commodity/futures Nidhi Aggarwal, Sargam Jain and Susan Thomas (2014) The
indexes are hypothetical indexes; unlike equity/futures indices, policymaking community in India scrutinizes and criticizes all
they are not (yet) exchange tradable. Each index, therefore, is derivatives trade, particularly those involving agricultural
R. Sushma et al. International Journal of Research in Engineering, Science and Management, VOL. 4, NO. 11, NOVEMBER 2021 180

commodities. The consensus is that these financial instruments hypothesis empirically. It would be interesting to look at the
are traded by quite different people than agriculturists, resulting impact of other common empirical models on market efficiency
in derivatives values that are influenced by different factors results.
than the underlying commodity price. This research evaluates Robert S. Pindyck (2014) Prices of commodities are variable,
the effectiveness of commodity futures price discovery and and volatility fluctuates with time. Volatility issues can
hedging after this adjustment, concluding that, on aggregate, influence market variables by influencing the marginal value of
futures prices regulation very effectively, but help to control storage and a portion of the total marginal cost of storage
risk less effectively. The study speculates on what elements generation, rather than the current cost to produce the
might improve hedging success from the perspective of the commodity rather than waiting for more price data. This
hedger. Large settlements costs are a result of a lack of research looks at the impact of volatility in short-term
distribution centres and the instability of invoices raised, a commodity market dynamics as well as the factors that
mismatch between the grade stated in the futures contract and influence volatility. It creates a conceptual framework of
what is ready for sale in the market, and disruptions resulting stocks, spot, and futures market that clearly accounts for
from various regulatory interventions. The link between futures instability and estimates it using daily / monthly data for the
and spot market prices is the basis for all evaluations of how petroleum complex, which includes crude oil, heating oil, and
effectively a futures market aids in price discovery or hedging gasoline. The estimation is based on weekly statistics for crude
efficacy. The information for the research comes from three and heating oil from January 1, 1984, to January 31, 2001, and
commodities exchanges: MCX, NCDEX, and NMCE, and gasoline from January 1, 1985, to January 31, 2001. (Reflecting
spans the years 2003 to 2014. The initial phase of the research the later start of gasoline futures trading). To calculate market
uses daily pricing data on both spot and futures prices, which is prices and variability, daily future settling prices for the closest
comparable to what is accessible in the exchange's copy. These contract (typically the spot contract), the second nearest, and
two results are unrelated to other microstructure outcomes such the third-nearest were employed. Non-trading days must be
as price volatility or market size, according to our findings. We considered. If the spot price maintained a geometric
believe that these factors produce price disturbances in either Distribution, the sample variance might be calculated by
the spot price or the futures price, or both, reducing the hedging dividing log price increases by the ratio of the number of
benefits of utilizing futures substantially. preceding days. Taking volatility into consideration can assist
N. R. Parasuraman, Ullas Rao (2014) India's rising economic explain changes in the spot-futures spread, but not changes in
weight in the emerging economy club has resulted in a constant the current price. When it comes to volatility, market
influx of new financial instruments into the capital markets. The characteristics don't explain much of its behaviour, hence it can
associated dangers arising from a volatile world economic be considered exogenous. These findings lend some credence
weather driven by a slew of geopolitical events exert huge to the commodity price dynamics method suggested at the
pressure on corporate management to implement effective outset. The findings for heating oil were quite close to the
techniques in mitigating some of these risks, even though an theory, while for crude oil and gasoline the results are less clear
expanding economy presents an enormous opportunity for cut. Instead of fundamentals, price variation could be due to
firms to earn outstanding rates of return on financial resources. speculative noise trading or herding.
In recent years, India has seen an increase in financial managers' P. Srinivasan and P. Ibrahim (2014) Using Johansen's Vector
interest in skilfully utilizing investment products such as Error Correction Model (VECM) and the Bivariate ECM-
Futures and Options to combat the uncertainty stemming from EGARCH (1,1) model, this study seeks to investigate the price
price swings in underlying assets. Using an empirical analysis discovery and market volatility in Gold futures and spot
characterized by the expense, we analyse the premise markets of the National Commodity Derivatives Exchange
surrounding economic efficiency surrounding commodities (NCDEX). The empirical conclusion demonstrates that the gold
markets in this research. We also apply the cost-of-carry spot market is dominant and functions as an effective price
concept to the stock markets to support the reality of the discovery engine. Aside from that, the findings of the study
occurrences. The cost-of-carry model is rejected by both single reveal that certain information spills over from the spot market
hypothesis and joint hypothesis tests, meaning that in the to the futures market and that the gold spot market has the
absence of external effectiveness, speculators should be able to power to expose all new information through the channel of its
profit from relative prices between futures and spot prices in innovation. The major goal of the Indian commodity market is
both commodities and equities markets. While market to increase value for traders by providing a way to protect their
manipulators trading in stocks would be forced to scrupulously businesses from unfavourable price changes. Traders and
follow the standards set forth by the capital markets regulator exporters can use the futures market's price discovery
(SEBI), the range of inspection in products is significantly more mechanism to hedge their price risk and increase their
limited. Even though the Forward Markets Commission (FMC) competitiveness. The procedure by which markets attempt to
regulates commodity markets such as the MCX, the long- achieve an optimum price is known as price discovery. The
awaited Forward Contract Regulation Act (FCRA) is still current research is significant in that it allows for the
pending. The viability of market efficiency over a longer time determination of which market is more efficient in processing
horizon would be an intriguing expansion. Furthermore, we and reflecting new information. Furthermore, studying
used the cost-of-carry model to test the market efficiency volatility interdependence can reveal how information is
R. Sushma et al. International Journal of Research in Engineering, Science and Management, VOL. 4, NO. 11, NOVEMBER 2021 181

conveyed and distributed across futures and spot markets. Price response to fresh information, which lasts for more than ten
volatility is closely connected to the flow in an arbitrage-free days. At longer lags, we also observe some notable peaks
economy. The analysis confirms that NCDEX's gold futures (positive/negative). It could be due to a pricing miscalculation
market found it difficult to integrate information into its prices. or market friction. The spot's stationarity is restored.
This obviously demonstrates that the gold futures market is not Sushismita Bose (2009) In recent years, persistent inflation
yet mature and effective in terms of information dissemination. expectations in global commodity prices have spurred a dispute
To summarize, the spot gold market is more perfectly efficient about their nature, with global commodity speculating getting
than that of the futures market. singled out as the principal cause of rising costs, leading to calls
Brajesh Kumar (2011) This research looks at the real-time for a ban on futures trading for numerous key commodities.
and dynamic connection among spot price volatility and futures Increased capital has been coming into the commodity futures
trading activity, such as volume and open interest, in a market in recent years, necessitating an examination of the role
developing commodities derivatives market, using the Indian future market participants may play in creating or distorting
commodity derivatives market as an example. The impact of prices in the core commodities market. The US Securities and
futures trading volumes on spot volatility in the Indian Exchange Commission and the Indian Expert Committee on
commodity futures market is investigated in this study. We look Futures Trading conducted investigations but found no clear
at this for a broad range of commodities, including agriculture, evidence of the futures market's role in exacerbating price
metals, precious metals, and energy commodities. The GARCH inflation. However, the taskforces have raised several critical
method is utilized to represent the concurrent link between spot problems that might be used to develop a guideline for
volatility and futures market activity, while the VAR modelling enhancing the infrastructure, supervision, and efficiency of
methodology is used to model the lead-lag relation. It is India's commodity market.
investigated the dynamic link between spot volatility, futures
trading volume, and open interest. Four agricultural 4. Research Methodology
commodities, Soybean, Maize, Castor seed, and Guar seed, The study aims to focus on the development of exchange
three metals, Aluminium, Copper, and Zinc, two precious with special reference to Multi Commodity Exchange (MCX).
metals, Gold and Silver, and two precious metals, Gold and The study is exploratory in nature and the data is secondary,
Silver, make up our data. NCDEX data on volume and open collected from annual reports, journals, books, newspapers and
interest is utilized for agricultural commodities, while MCX from the website of Multi Commodity Exchange, securities,
data is used for non-agricultural commodities. The choice of and exchange board of India. The data period considered for the
platform for a futures contract is dependent on a commodity research is from 2003 to 2020.
price relatively higher trading volume at the exchange. It was
found that Agricultural commodities' daily mean returns are A. Development of Multi Commodity Exchange of India
positive and minor, except for maize, which has negative Limited (MCX)
returns. The marketplace has the most resistance, or traders' Multicommodity exchange is India’s no 1 exchange playing
as a market leader providing the commodity ecosystem
Table 1
Key milestone
2021 MCX empanelled two domestic refiners as per “MCX Good Delivery Norms for BIS-Standard Gold/Silver” for delivery in Gold Mini (100 grams)
futures and options contracts w.e.f. March 6, 2021
2020 MCX launched the Rubber contract on 28th December 2020
MCX launched futures on the MCX Comdex Base Metal Index (METLDEX™) on October 19, 2020, and became the first Indian exchange to have
derivatives on an index of Base Metals
MCX launched futures on the MCX Comdex Bullion index (BULLDEX™), India’s first bullion index, on August 24, 2020
Silver Mini (5 Kg) contract became deliverable with Silver (five nos. of one-kilogram bars) as a delivery lot from the June 2020 contract
Silver (1kg) Micro contract was made deliverable with one-kilogram silver bar as a delivery lot from February 2020 contract
2019 Launched the MCX iCOMDEXTM commodity index series, comprising of a composite index, two sectoral indices and four single commodity
indices in December.
Introduced real-time MCX Comdex Excess Return index series including composite, sectoral (bullion & metal) and single commodity ER indices.
Cotton: Record delivery of 3.94 lakh bales (1 bale=170 kg) in the season ending in Aug 2019, since inception from October 2011.
Conversion of all MCX Base Metals futures contracts to delivery-based settlement mode from Both-options settlement mode from March 2019 and
onwards.
Successfully introduced 1-gram delivery based Gold Petal Contract.
Signed MoU with Zhengzhou Commodity Exchange.
Launch of Kapas Contract
2018 Grant of recognition to Multi Commodity Exchange Clearing Corporation Limited (MCXCCL) a wholly owned subsidiary of MCX to act as a
Clearing Corporation.
Launched Options contract in Crude Oil, Silver, Copper & Zinc
Launched first-ever Brass futures contract in the world
2017 Launched first-ever Gold Options contract on futures in India
2015 MOU with CME group
2012 Became India’s first listed exchange
2008 Became a member of the International Organisation of Securities Commissions (IOSCO) 2006
Product licensing agreement with NYMEX (CME Group)
2005 Post licensing agreement with NYMEX, Licensing agreement with LME
2003 Commenced operations on November 10
R. Sushma et al. International Journal of Research in Engineering, Science and Management, VOL. 4, NO. 11, NOVEMBER 2021 182

participants with a platform towards Price Discovery and Risk The exchange has an extensive wide reach at the national
Management. The exchange, which started its operations in level, with around 600+ registered members and 48000 plus
November 2003, operates under the regulatory framework of Authorized persons having a presence around 1199 cities and
the Securities and Exchange Board of India (SEBI). The towns in India as on 30th September 2021. The exchange has
exchange offers both future and options trading in various around 92.6 per cent of the market share in terms of value and
segments including bullions, industrial metals, energy, and volume of commodity futures as of 2021-22.MCX has an
agricultural commodities. The first exchange to offer options in association with the leading global exchange such as CME
Gold with Gold (1 Kg) futures as underlying in the year 2017 Group, London Metal Group, Dalian commodity Exchange,
on Dhanteras day. Currently, MCX offers options on Taiwan Futures exchange, Zhengzhou commodity exchange
commodity futures contracts traded on an exchange. As per and European energy exchange.
current norms, only European Style Commodity options are The average daily trading of commodity futures contracts
available in India. stood at Rs. 31595crore in 2020-21 as compared to Rs. 32550

Table 2
Commodities traded at MCX
Metal Bullion Energy Agriculture Index
Aluminium Gold Crude oil Black pepper, Cardamom MCX BULLDEX, MCX METLDEX
Copper Gold mini Natural gas Cotton
Lead Gold Guinea Crude Palm oil
Nickel Gold petal Kapas
Zinc Silver Mentha Oil
Silver mini Rubber
Silver micro

Table 3
Performance of commodity Futures Group-wise in tonnes, lots and crore (Sources: SEBI Handbook of Statistics)
Agriculture Metals Bullion

Turnover
Turnover

Turnover
('000 tonnes) Volume

Volume

('000 tonnes) Volume

Volume

('000 tonnes) Volume

Volume
No.of Trading days

(₹ crore)

(₹ crore)

(₹ crore)
Period

(Lots)

(Lots)

(Lots)
1 2 3 4 5 6 7 8 9 10 11
2010-11 307 27,242 39,67,369 1,14,152 1,24,163 7,41,49,730 25,08,858 710 7,65,08,289 51,69,268
2011-12 310 32,465 61,18,325 1,97,781 1,18,499 8,88,65,001 27,09,758 1,011 22,83,44,739 99,63,667
2012-13 305 32,926 76,30,359 2,70,295 1,51,396 11,39,43,114 31,40,109 723 16,22,79,284 78,07,063
2013-14 310 20,877 59,05,031 1,71,391 85,674 6,37,97,242 17,26,336 400 9,27,48,201 42,63,195
2014-15 255 13,504 33,71,516 1,10,268 62,083 4,73,52,037 12,74,213 240 4,62,94,585 21,53,427
2015-16 257 13,961 34,10,594 1,21,699 89,331 6,38,95,652 15,05,004 234 4,26,02,824 20,70,147
2016-17 260 15,947 30,87,740 1,39,312 93,078 6,44,21,776 17,53,887 207 3,71,51,550 20,40,270
2017-18 254 11,648 23,17,338 1,14,082 95,153 6,81,33,042 21,12,532 164 2,78,40,060 13,63,703
2018-19 257 9,662 18,28,722 1,01,233 1,11,475 7,88,35,865 25,25,601 169 2,88,37,833 15,13,817
2019-20 259 17,89,000 1,00,919 3,75,97,000 15,68,294 5,08,29,000 29,15,534

Energy Total Open interest at the end of the period

Open Interest ('000 tonnes)
Turnover

Turnover
('000 tonnes) Volume

Volume

('000 tonnes) Volume

Volume

Value
Open Interest (Lots)
(₹ crore)

(₹ crore)

(₹ crore)
(Lots)

(Lots)

12 13 14 15 16 17 18 19 20
6,31,870 5,81,72,478 20,49,224 7,83,986 21,27,97,866 98,41,502 682 2,73,364 12,180
7,30,401 6,65,26,548 27,25,889 8,82,377 38,98,54,613 1,55,97,095 605 6,33,342 15,720
8,16,378 9,11,92,784 36,63,589 10,01,423 37,50,45,541 1,48,81,057 1,141 6,52,817 21,908
4,21,354 5,17,51,062 24,50,527 5,28,305 21,42,01,536 86,11,449 413 3,44,214 11,128
4,04,556 5,15,57,804 16,45,799 4,80,383 14,85,75,942 51,83,707 561 3,11,143 8,715
8,07,702 12,43,25,369 19,37,345 9,11,229 23,42,34,439 56,34,194 605 3,03,973 9,080
6,74,225 11,78,49,477 19,32,191 7,83,457 22,25,10,543 58,65,661 540 2,84,204 9,230
5,74,029 10,76,34,572 17,92,678 6,80,995 20,59,25,012 53,82,996 576 3,00,172 11,205
6,71,698 13,69,46,607 24,50,777 7,93,004 24,64,49,027 65,91,428 513 3,13,641 14,244
20,54,810 38,13,027 29,56,960 83,97,775 1,48,505 11003
R. Sushma et al. International Journal of Research in Engineering, Science and Management, VOL. 4, NO. 11, NOVEMBER 2021 183

Table 4
Performance of commodity options group-wise in tonnes, lots and crore
2017-18 2018-19 2019-20
Volume in 000tons Value in crores Volume in 000tons Value in crores Volume in 000tons Value in crores
Bullion 0.03 10,354 2.23 1,35,700.09 3 93,008
Metals other than Bullion 194 6,493 80 2,163
Energy 12,264 38,752 24,964 75,285
Sources: SEBI Handbook of Statistics
crore in 2019-20 a decline of 3%. The total turnover of can be executed in a Market situation. Hence eliminating the
commodity futures trade on exchange stood at 79 lakh crores in risk will ensure market liquidity where the current participants
2020-21. a reduction of 4% due to fewer trading hours allowed can exit the market anytime.
because of a pandemic. The net worth of the Company as of
March 31, 2021, stood at Rs1,58,036 lakh. 6. Performance
B. Participants of Commodity Market Table 3 clearly shows the Performance of commodities
group-wise of trade value in Multi commodity exchange of
The participants can be Brokers, Individual, Banks, Mutual
India Limited (MCX) during the year 20010-11 to 2019-2020.
fund, III alternative category, Eligible foreign Entities,
The total of Agricultural stood at Rs. 114152 crore (2010-11)
corporates all of these are classified into
as compared to Rs. 100919 crore (19-20). The metal futures
 Hedgers: Hedgers use the derivative instrument to
with Rs. 2508858 crore (2010-11) as compared to 1568294
minimise the risk associated with the price of an
crores (2019-20). Bullion futures have Rs. 5169268 crore
asset.
(2010-11) as compared to Rs. 3813027crore (2019-20). The
 Speculators: Speculators uses derivatives to get
energy futures have 2049224 crores (2010-11) as compared to
benefited by leverage on future movement in the
3818027 crores (2019-20). The total futures contract for the
price of the asset.
period 2010-11 is 9841502 as compared to Rs 8397775 in 2019-
 Arbitrageurs: Arbitrageurs use the derivative tools 20. The highest turnover is in 2011-12 with 15597095 and the
to take advantage of two different markets in the lowest total turnover is Rs. 5183707 during 2014-15.
price of the asset. Table 4 clearly shows the Performance of commodities
options group-wise of trade value in Multi commodity
5. Role of Commodity Exchange Market in Economic exchange of India Limited (MCX) during the year 2017-18 the
Development
traded value is 10354 crores as compared to Rs. 93008 crore in
Commodity exchange markets are an integral part of the 2019-20 in the bullion market. The metals options started
economic system. The commodity market allows users to invest during 18-19 with 135700 crores in bullion as compared to
in commodities in non-agricultural products such as precious 38752 during 2019-20, energy futures have 38752 in 2018-19
metals, Base metals, Agricultural products, Energy. Their role as compared to 75285 in 2019-20.
in economic development is very significant.
A. Price Discovery 7. Conclusion
Price discovery is the process of providing Equilibrium Indian commodity market has experienced a lot of changes
prices that reflects current and Prospective demands on current due to the financial crisis, change in the global trend. At present,
and prospective supplies and making these price visible to all. the market is an opening lot of opportunities and threats. MCX
The commodity market is important in terms of actual trading company being in the market for two decades by offering online
that takes place because it will guide the economy in optimum trading, clearing and settlement of transactions, offering
production and consumption decision. The process will benefit innovative products and spreading the base to participants. The
in other aspects. The price by going to exchange will ensure a MCX most active contracts as of November 2021 are Natural
fair and competitive price. gas, gold, copper, MCX bulldex, MCX Metldex etc. the mixed
opinion of future trading could be because of ups and downs in
B. Risk Management the market in terms of NSEL scam, The sudden shifts in
The commodity market offers innovation in risk operations of the commodity market, contract specification
management. The risk exists because of its uncertainty in changes. The options trading is quite active in the market. They
nature. Exchange Platform helps the buyer and seller to trade in have had an increasing trend in the past 3 years with a positive
the market by providing the possibility of effective risk sign towards markets. Thus it can be concluded that Multi
management through hedging tools. The presence of different commodity exchange is the most efficient concerning price
derivative instruments in the market makes risk management discovery and risk management.
efficient.
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