Oil, rouble volatility bring down MCX ranking on global commexes

India’s largest commodity exchange, MCX, has suffered in its global ranking, despite showing growth in terms of the number of contracts traded. Russia’s Moscow Exchange has seen an increase in crude oil trading. Not only that, Moscow exchange has now surpassed Eurex which used to be largest in Europe so far due to a consistent increase in currency trading. 

Ranking of exchange industry for 2016 given by the Futures Industry Association (FIA) issued two weeks ago shows Multi Commodity Exchange (MCX) was ranked 7 from 6 last year and National Commodity & Derivatives Exchange (NCDEX) was ranked at 10 from 9 last year. 

Ranking of NCDEX, number two exchange, has also come down by a notch and it has seen a sharp fall in contracts traded but it had its own reasons as following two largely traded contracts that are castor seed and chana had been suspended during 2016. 

FIA said in its report about Moscow Exchange’s growth, “its crude oil contract which tracks the Brent oil futures traded in London on ICE Futures Europe, contract size is based on just 10 barrels, compared to 1,000 for the ICE contract. That makes the contract more accessible to retail traders, but somewhat less suitable for corporate entities looking to hedge price risk. This is reflected in the open interest data. At year-end 2016, open interest for the MOEX Brent crude oil contract was approximately 450,000 contracts, while open interest in the ICE Brent crude oil futures was more than four times that amount at 2.18 million contracts.”

In Indian market space, looking at MCX, a number of contracts traded has seen a growth of 13.3 per cent to 245 million contracts and NCDEX has seen a fall of 31.2 per cent to 20 million contracts. 

While exchanges didn’t prefer to discuss the issue, an industry source said that “Moscow exchange has also introduced some mini contracts and for their main crude contract also the contract size of 1 barrel is one tenth of MCX contract. Moscow exchange trades in brent crude oil while MCX benchmark contract is WTI crude oil. Like their Brent Oil contract size is 1/10th that of MCX contract. Huge volatility in prices of Crude oil and Rouble in 2016 was also a reason for Moscow exchange to surpass MCX."

Moscow’s commodity contracts have nearly quadruplicated in 2016 to 458.1 million from 122.2 million in 2015 following mini contract and currency volatility. 

Indian exchange industry also explains that “in Indian market still options are not traded, nor the market is open for institutional players. Both these are expected to start in 2017 which could see Indian exchange industry shining in global ranking and already new commodities are being added to the trading list, some of for the first time in Indian futures market.”