Multi Commodity Exchange of India

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Multi Commodity Exchange of India
MCX.jpg
Founded 2003
Headquarters Mumbai, India
Key People CEO and MD Lamon Rutten
Products Commodity derivatives contracts
Website http://www.mcxindia.com

The Multi Commodity Exchange of India (MCX), part-owned by India-based exchange developers Financial Technologies (India), is India's largest derivatives and commodities exchange and presently controls around four fifths of India's rapidly expanding public-trading market for commodity futures. International investors including Fidelity and NYSE Euronext also hold stakes in MCX.

According to the annual Futures Industry Association's survey of the world's leading derivatives exchanges in 2012, the Multi Commodity Exchange of India was ranked as the world's tenth-largest derivatives exchange by contract volume, putting it below the Moscow Exchange and above the Dalian Commodity Exchange. The report released in March of 2013 states that the number of futures and options traded on NSE fell 19.8 percent from 2011, to 959 million contracts.

Background

The MCX was launched in November 2003 by Financial Technologies (India) Ltd (FTIL), a financial services software firm which secured one of the four licenses offered when the Indian government ended a longstanding ban on commodities exchanges in 2002. It has since grown more rapidly than its two main domestic rivals, National Multi-Commodity Exchange (NMCE) and National Commodity and Derivatives Exchange (NCDEX), and is now the market's leading player.

Other founding shareholders included State Bank of India, Union Bank of India and HDFC Bank. Financial Technologies plans to reduce its holding from 64.3 percent through a planned initial public offering (IPO) - though it has yet to announce a formal listing date - and may cut it to a minority stake when India’s ownership laws are relaxed.[1]

An affiliate of Fidelity acquired a 9.24 percent stake in February 2006 for $49 million, and Citigroup and Merrill Lynch each bought a 5 percent holding in September 2007.[2]

Other shareholders include: National Bank for Agriculture and Rural Development (NABARD), the National Stock Exchange of India (in which FTIL has a 1 percent stake), Union Bank of India, Canara Bank, Bank of India, Bank of Baroda, HDFC Bank and SBI Life Insurance, Passport Capital and GLG Partners.[3] The company has fostered product development with a dozen alliance partners, including the London Metal Exchange, the New York Mercantile Exchange and the Tokyo Commodity Exchange. MCX holds a 49 percent stake in the Dubai Gold & Commodities Exchange.

Business Model and Product Development

The MCX operates its own clearinghouse and had 1,381 members at March 31, 2007, introducing a fourth membership class in October 2007. The MCX listed futures in 58 commodities as of Nov. 14, 2007, focused on metals, energy and agricultural products. In terms of the number of contracts traded, MCX claims to rank no. 1 in silver, no. 2 in gold and no. 3 in crude oil, copper, zinc and natural gas, based on data published on the respective Web sites of competitive exchanges.

Natural gas futures were launched in July 2006, potato futures in September 2006, and coffee futures in January 2007. MCX also has attracted volume in trading kapas, soya oil, cardamom, and menthol oil. On Oct. 6, 2008, MCX Stock Exchange (MCX – SX), a subsidiary of MCX, announced the launch of currency futures in Mumbai. Live trading began on the MCX-SX platform at 9 a.m. on Oct. 7, 2009.

MCX launched India's first electricity futures on Jan. 9, 2009. The contracts are weekly and monthly. They trade in units of 24 megawatt hours; the tick size is 1 rupee per megawatt hour.[4]

Key people

Chief Executive Officer and Managing Director Lamon Rutten was appointed in mid-2009 after the previous boss, Joseph Massey, shifted to the top jobs at MCX's recent stock exchange offshoot, MCX-SX. Rutten was previously the joint managing director of MCX and prior to that held various positions with the United Nations Conference on Trade and Development (UNCTAD) in Geneva, Switzerland and with the International Task Force on Commodity Price Risk Management at the World Bank.[5] He holds a postgraduate degree in international economic management from the University of Tilburg, the Netherlands.

Contract Volume

Year Total Annual Volume* Percent Change World Ranking
2012 959,613,240 (-) 19.8% 10
2011 1,196,322,051 (+) 10.6% 9
2010 1,081,813,643 (+) 180.7% 9
2009 385,447,281 -- --

2012

Exchange Volume Percent Change
MCX-SX 570,862,166 (-) 32.8%
Multi Commodity Exchange of India 388,751,074 (+) 12.3%
Multi Commodity Exchange of India 959,613,240 (-) 19.8%

History

  • On June 1, 2010 - MCX launched the lead mini futures contract. The contract mirrors the full-sized 5-ton lead futures contract, but is sized at 1 ton.[6]
  • On May 24, 2010 - MCX launched a zinc mini futures contract. The contract mirrors the full-sized 5-ton zinc contract on MCX but is sized at 1 ton.[7]
  • On April 15, 2010, MCX-SX announced it had completed its regulatory compliance the shareholder structure of the exchange. MCX-SX announced its shareholders at that time, notably, IFCI Limited as the largest shareholder with a 13.23 percent stake, Union Bank of India with 11.5 percent and Punjab National Bank with 9.2 percent.[8]
  • On January 14, 2010 - parent company Financial Technologies (India) Ltd announced that MCX had migrated its trading and clearing platforms to the next version of its DOME trading platform, and CnS, its clearing and settlement technology.

MCX announced on October 17, 2009 that it had reduced members' transaction fees from four Indian rupees per 100,000 rupees of turnover to 2.5 rupees, eliminating the previous imcremental system of fees.[9] MCX officials expect the new charges to cut members' trading costs by around 50%.



References

  1. Multi Commodity Exchange denies IPO plan. Mint.
  2. "Citigroup and Merrill invest in MCX". Financial Times.
  3. "FTIL Annual Report". Financial Technologies.
  4. MCX Launches India's First Electricity Futures. FO Intelligence.
  5. Profile of MD & CEO Mr. Lamon Rutten. MCX.
  6. [{{{url}}} MCX launches futures trading in Lead Mini]. MCX.
  7. MCX launches futures trading in Zinc Mini. MCX.
  8. [http://www.mcxindia.com//Uploads/NewsDocs/PressReleases/2010/April/English/PR_15Apr10.pdf MCX Stock Exchange Completes Shareholding Compliance under MIMPS Regulations]. MCX-SX.
  9. MCX lowers transaction fees. Press Trust of India.