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Multi Commodity Exchange (MCX)

The year 2003 saw a new beginning in the exchange market in India. Financial Technologies India limited came up with India’s first ever commodity exchange by the name of MULTI COMODITY EXCHANGE or MCX. Being India’s first listed exchange, it functions within the guidelines of the Forward Contracts Regulation Act 1952. From the year of establishment till date it has seen a rapid growth in consumer ship and investment. It has become India’s leading exchange trading in segments like bullion, energy and agriculture, ferrous and non-ferrous metals providing online platform commodity futures exchange and settlement of commodity future transactions providing a risk management system. With the launch of an IPO in 2012 it became in the country’s only public listed exchange and first ever to launch an IPO.

The MCX has its base in Mumbai it became the 7th largest commodity exchange globally just in 13 years from establishment in the year 2016 which was quite an achievement globally. In 2017 it touched new heights by coming into a partnership with Thomson Reuters and developed iCOMDEX which was the country’s first ever co-branded commodity index series. All records are maintained electronically and real-time on the online application by the name “Comprise” or the Commodity Receipts Information System. The MCX is growing continuously and rapidly and boosting its contribution in the economic growth of the nation.

TRADED COMODITIES IN MCX

In the initial phase of the exchange the core concentrating was kept on metal and energy commodities by the developer. With the rapid growth it entered in other commodities as well which were

  1. Precious Metal Commodities

This included metals which have high value in the retail market like Gold, Silver and Platinum. A lot of investors were interested in investments with the introduction of this category of commodity.

  1. Industrial Metal Commodities

Metals widely used in the manufacture industry were also introduced in MCX which saw a growth in the investor count. The metals are Zinc, Tin, mild Steel, Copper, Nickel, Aluminium, Lead and Copper

  1. Agricultural Commodities

The number of commodities listed for trading increased by a huge margin with the introduction of agricultural commodities. The traded commodities included Black pepper, Castor seed, Wheat, Barley, Menthe Oil, Palm Oil, Soya Oil, Corn, Soybean, Chana, Melted menthol flakes, potatoes, Coriander, Cotton, Almond, Turmeric and Rubber

  1. Energy Commodities

These are all high value commodities like Aviation Turbine Fuel, Gasoline, imported Thermal Coal, Brent Crude Oil, Heating Oil, and Natural Gas

With plans to expand and bring in even more commodities the MCX is emerging as the world’s most pre-eminent commodity exchange. To trade in MCX there for four types of memberships it offers.

Trading membership in MCX

The following are the 4 different types of memberships offered by the Multi Commodity Exchange and each has a different set of rights and responsibilities

  1. TM (TRADING MEMBER)
  • The people under this membership are simple traders who trade for either themselves or on behalf of some clientele. They do not have the rights to clear the trade.
  • The eligibility for this membership is open to HUFs i.e. Hindu Undivided Families, partnerships, or any individual or organisation.
  • The admission fee prescribed as per the web portal is Rs 7.5 Lakh
  • The minimum net worth required to procure this membership is Rs 10 lakh for individuals and Rs 25 for organisations.

 

2. PCM (PROFESSIONAL CLEARING MEMBER)

  • The people under this category have both rights to trade as well as to clear trade for themselves or the clientele they are working for.
  • The eligibility to procure the membership of MCX under this category is given to all companies and organisations like banks and financial institutes.
  • The admission fee prescribed as per the web portal is Rs 10 lakh
  • The minimum net worth required for the membership is Rs 500 lakh

 

3. TCM (TRADING CUM CLEARING MEMBER)

  • The people who procure this membership can trade and clear the trade for themselves but not for others.
  • The eligibility is for partnerships, cooperatives, individuals, financial institutes, HUFs, associations, banks.
  • The admission fee prescribed as per the web portal is Rs Rs 10 lakh
  • The minimum net worth requirement for this category of membership is Rs 75 lakh

 

4. ITCM (INSTITUTIONAL TRADING CUM CLEARING MEMBERS)

  • The membership holders of this category enjoy more or less similar rights to those of trading cum clearing members. They have an added privilege of ability to appoint individuals or subsidiary as traders.
  • The eligibility for this category is open to large organizations like stock exchanges, commodity exchanges, cooperatives, commodity brokers.
  • The admission fee prescribed as per the web portal is Rs 25 lakh

The membership can be procured by filing application form on the web portal of MCX and providing details like

  1. Type of constitution applying
  2. Provide the Membership type desired
  3. Pay the designated fee as per the membership type
  4. ID proof along with Contact details of the applicant
  5. PAN details of applicant
  6. SEBI registration details if applicable

The review board shall inspect information and eligibility details and then inform the applicant about acceptance or rejection of the membership requested. To make commodity trading more fruitful traders have come up with certain ideas which act as rules for new entrants in the MCX world

  1. Trade in diversified fashion to minimise risks
  2. All trading software’s allow a stop loss so always benefit fro set stop loss
  3. Do not completely rely on the broker do market research
  4. New borrow funds for trading
  5. If results are positive and you have revenue always be patient and wait for growth
  6. If you find yourself in a financially bad situation try and exit early

Trading in commodities is not an overnight fortune business so patients is the key to survive long.

 Frequently Asked Questions (FAQ)

What is MCX?

The MCX or MULTI COMODITY EXCHANGE is India’s first listed exchange dealing in commodities. It functions within the guidelines of the Forward Contracts Regulation Act 1952. It has become India’s leading exchange trading in segments like bullion, energy and agriculture, ferrous and non-ferrous metals providing online platform commodity futures exchange and settlement of commodity future transactions providing a risk management system.

Which is the most commonly traded commodity?

As per the studies of buying and selling of commodities it has been often observed that he most commonly traded commodity has been crude oil and its derivatives.

How do we trade in MCX?

To trade in commodities exchange market a person or an organisation who is interested needs to first procure the membership of the MCX. Only those who have membership are eligible for trading.

What are the types of membership provided by the MCX?

The MCX offers 4 types of membership to traders currently which are

  1. TM or the trading member
  2. PCM or the professional clearing member
  3. TCM or the trading cum clearing member
  4. ITCM or the institutional trading cum clearing members

 What are the basic revenue requirements to own membership of MCX?

The financial requirements for the four types of memberships offered by the MCX are

  1. TM or the trading member requires a admission fee prescribed as per the web portal is Rs 7.5 Lakh. The minimum net worth required to procure this membership is Rs 10 lakh for individuals and Rs 25 for organisations
  2. PCM or the professional clearing member requires admission fee prescribed as per the web portal is Rs 10 lakh. The minimum net worth required for the membership is Rs 500 lakh
  3. TCM or the trading cum clearing member requires admission fee prescribed as per the web portal is Rs Rs10 lakh. The minimum net worth requirement for this category of membership is Rs 75 lakh
  4. ITCM or the institutional trading cum clearing members requires admission fee prescribed as per the web portal is Rs 25 lakh

What was the face value of the IPO launched by MCX in 2012?

In the year 2012 MCX become the first ever exchange in India to launch an IPO and became the first ever listed exchange in the country. The face value of the IPO was kept at Rs 10 in price band of Rs 860 to Rs 1032 per equity share. It has launched approximately 6427278 equity shares for public issue.

Who regulated the MCX?

Initially the MCX was regulated by the Forward Market Comission. This saw a merger with the SEBI in the year 2015. Ever since the regulatory body for MCX has been SEBI.

What are the bullion trading commodities in MCX?

The bullion trading commodities are

  1. Gold
  2. Gold mini
  3. Gold guinea
  4. Gold petal
  5. Gold petal ( New Delhi)
  6. Gold global
  7. Silver
  8. Silver mini
  9. Silver micro
  10. Silver 1000

 Who is the founder of MCX?

The founder person of MCX is Mr Jignesh Shah although he has resigned from the board. The current chairperson is Mr Saurabh Chandra and CEO is Mr P.S. Reddy.

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