MCX turnover rises despite payment crisis in a group company

On Friday, gold and silver prices were down by Rs 1,000 per 10g and Rs 2,000 kg respectively

Despite controversies surrounding around Multi Commodity Exchange (MCX) for the ongoing payment crisis at its group company National Spot Exchange Ltd (NSEL), the turnover of the MCX has risen sharply in the last few days.

The turnover has doubled in the last three days from Rs 29,647 crore on Monday to Rs 61,211 crore on Wednesday. While the turnover on the National Commodity & Derivatives Exchange (NCDEX) marginally gone up from Rs 5,101 crore to Rs 5,798 crore, National Multi Commodity Exchange (NMCE) cloaked a decline in its business from Rs 1,106 crore to Rs 944 crore in the same period.

Traders say that the risk management system at the MCX is strong and constantly monitored by the commodity derivatives market regulator the Forward Markets Commission (FMC) and hence, there is no lack of confidence on the MCX.

In contrast, there was a regulatory hole for spot exchange resulting into a poor risk management, they added.

“Prices of gold, silver and crude oil have been very volatile in the last couple of days. Consequently, traders were long and short (took position or booked profit), either way that contributed to the exchange turnover. Also, the volatility in bullion prices helped traders arbitrage between global and domestic exchanges,” said Ashok Mittal, CEO, Emkay Commotrade Ltd.

On Friday, for example, gold and silver prices were down by Rs 1,000 per 10g and Rs 2,000 kg respectively. Known as a non-agri commodity futures trading platform, MCX cloaks a large chunk of its business from gold, silver, crude oil and natural gas. MCX recorded the highest daily turnover of Rs 1,19,941 crore on April 15, 2013.

Both MCX and NSEL are promoted by FTIL.