MCX turnover doubles to Rs 20,000 crore on restoration of normal trading hours

Mumbai: Country’s largest commodities exchange MCX, which reported a 60 per cent decline in daily turnover after curtailment of trading hours, saw the turnover more than double to nearly Rs 20,000 crore following restoration of normal trading hours last week.

In the wake of the coronavirus pandemic, Sebi had cut short trading hours to 10 am to 5 pm as against 9.00 am-11.30 pm schedule earlier. As a result, the daily turnover sharply dropped to Rs 10,000 crore from around Rs 48,000 crore earlier.

“Our turnover more than doubled to over Rs 20,000 crore on April 30 when full trading hours were restored. When trading hours were cut short, it was under Rs 10,000 crore. On the second day of full trading hours on May 4, the turnover touched Rs 19,049 crore at close.

“We hope to claw back to the high turnover as the market barrels back to normalcy,” MCX Managing Director and Chief Executive P S Reddy told PTI.

Generally, turnover more than doubles after 5 pm when international markets open. For instance, on May 4, the turnover was only Rs 8,683 crore at 5 pm but the same jumped to Rs 19,049 crore at close at 11.30 pm.

Market was closed on May 1, 2 and 3.

Without offering a timeline to achieve past high turnover levels, Reddy said for trade to normalise, physical markets have to normalise first. For the markets to normalise coronavirus-induced disruptions have to come to end, he added.

Only when physical markets open fully, trading can pick up. Currently, the exchange’s volume is down more than 50 per cent for both crude and bullion, which constitute 40 per cent each of the total business turnover, he said.

On the steep hike in risk margins last week, Reddy said it had no impact on volume as brokers were already charging higher margins from their clients.

Last week, MCX, which controls over 94 per cent of the commodities trading volume and turnover, announced it would charge up to 125 per cent or Rs 1,95,000 per lot if price falls up to 90 per cent.

Last month, the bourse came under legal scrutiny after it allowed crude futures to be settled in negative prices on April 21. In what could be called historic, May contracts for crude futures plummeted 305 per cent on the New York Mercantile Exchange on on April 20 and finally settled at -USD 37.69 a barrel as traders did not have storage facility to take delivery.

Accordingly, MCX — which links its prices to Nymex rates — settled the trade at -Rs 2,884 a barrel. This forced a number of its brokers to drag the exchange and its clearing corporation to four high courts — Bombay, Delhi, Hyderabad and Gujarat.

So far, none of the courts have stayed the price settlement decision or gave any interim relief to brokers.

Meanwhile, MCX came out with an exit option for traders as it is yet to change its software to allow negative prices if the prices again come in the negative. The exchange has also clarified that the option would be prospective and would not affect settlement of past contracts.

The exit option would be offered to traders if the Nymex contract hits negative territory again, MCX said over the weekend.

When asked about the software change, which BSE has already done within days of the April 21 row, Reddy refused to offer a timeline but asserted that “the work is very much on”.

“I cannot offer a timeline as to when the technical work of changing our software to allow negative pricing will be completed. All I can say is that it is very much on and will be done at the earliest,” he said.

The bourse is consulting with its software vendor 63 Moons — formerly Financial Technologies and the original promoters of MCX — to enable negative price punching option.