MCX: Gold Exchange captures more than 85 percent market share in gold futures

Multi Commodity Exchange of India Ltd (MCX), the golden exchange has emerged as the No. 1 commodity exchange in India by capturing more than 85 percent of the total gold futures trading volumes.

The daily volume in gold futures contracts exceeds 400 Kilograms and records open interest of more than 300 gilograms.

MCX has taken a lead by constantly registering the highest volumes and turnover in the bullion futures contracts. It has emerged as the preferred exchange by the bullion market as it demonstrates highest efficiency levels. With increasing volumes on the exchange and overwhelming trading interest of the participants, MCX has also taken positive steps in ensuring phased introduction of trading in new commodities. On December 29, 2003 MCX introduced trading in rubber futures and will soon commence trading in oils & oilseeds, grains & pulses, soft commodities (cotton, sugar etc.) and spices & plantation segments.

Commenting on the expanding bullion market, Mr. Jignesh Shah, managing director, MCX said, "We believe that the Indian gold market is on the verge of a huge transformation with the introduction of futures trading. Indian gold fabricators and exporters are participating in a large way to hedge their market risk on MCX. With increased participation and trading volumes, MCX is emerging as the Golden Exchange of the country"

He added that, "conservatively estimates have found that the Indian gold futures market is expected to multiply at 10 times the rate of the spot market in the next three years and this will create a market of 8,000 tons of Gold, valued at Rs. 4,80, 000 crores.

Optimistically calculating with a multiple of fifty, a standard multiple factor in markets of TOCOM and COMEX, the Indian gold futures market is expected to grow to a staggering size of 40,000 tons of gold, valued at Rs. 24,00,000 crores. The collective market size of all commodities put together is expected to be of the order of US$ 600 billion.

Further, this market is expected to reach over 5000 cities in all 550 districts of India, riding smoothly on state of the art technology & industry friendly facilities provided by MCX."

MCX began live trading from November 10, 2003. On the first day of trading, the maximum trading interest was witnessed in gold and that too in the first contract month i.e. (gold-13Feb 2004) in which 26 Trades were done. Gold also witnessed an open interest of 8 Kgs at the end of the trading session. With the trading activity picking up and increased participation from market players coming in, the volumes on gold contracts have shown a considerable up trend. Hectic activity was witnessed in the last 4 trading days of the last calendar year when the volumes crossed 100 Kgs mark and on the last day (31st Dec 03) doubled to more then 200 Kgs. In the New Year, volumes surged to a new high of 214 Kgs (single side) as observed on January 5, 2004. Same bullish trends were noticed in the open interest and daily turnover figures.

At MCX the 'Trading Volume to Open Interest Ratio' is well in comparison to what is being witnessed in the globally established and matured commodity exchanges. It's distinguishingly noticed that there is not a single trading day on which the Open Interest has been reduced to ZERO, which is a positive signal of an emergence of extremely healthy market.

The synchronisation and convergence between the 'Traded Prices of GOLD on MCX and on New York Mercantile Exchange' substantiates the fact that global benchmarks are already being achieved in terms of the fitness and aptitude of the exchange towards discovery of the best price and liquidity being achieved with the active participation coming in from all the streams of the commodity traders. This demonstrates the fact that MCX stands by its enduring commitment to be an exchange with highest competency ratio and transparency. Thus ushering Indian agriculture and commodity markets into a new age where transparency is maximum, participation is from masses and market is accessible from every nook & corner of the country.