8/3/2019 MCX INTRO

1/2

http://www.mcxindia.com/home.aspx

http://www.altiusdirectory.com/Finance/mcx-ncdx.html

Introduction to Multi Commodity Exchange (MCX):

MCX: refers to Multi Commodity Exchange which facilitates trading in a variety of commodities in the country.

This is an independent commodity exchange operating in India with its base in Mumbai. The MCX was established

in the year 2003 with NABARD, NSE, Financial Technologies India Ltd, Corporation Bank, Bank of India, Bank of

Baroda, HDFC Bank Ltd, SBI Life Insurance Corporation Ltd, Fid Fund (Mauritius) Ltd etc. as key share holders.

MCX reaches out to 500 Indian cities with about 10000 trading terminals. MCX is the only market in India where

multiple commodities are traded.

MCX is engaged in future trading in a number of commodities like agricultural commodities, Bullion, Ferrous and

Non Ferrous metals, Pulses, Oil and Oil Seeds, Energy, Plantations, Spices and soft commodities. The average daily

turnover of MCX is about 1.55 billion US Dollars. Multi Commodity Exchange (MCX) captures almost 72% of the

market share and thus it occupies No1 position in India in the commodity market. MCX occupies no 1 position in

the world in respect of silver, No 2 position in Natural gas and No 3 position in crude oil and gold.

Categorywise Multi Commodity Exchange (MCX) Index:

Category Commodities

Metals Aluminum, Copper, Lead, Nickel, Sponge iron, Steel Long and Steel flat, Tin, ZincBullion Gold, silver

Fibre Long, medium and short staple cotton, Cotton yarn etc

Energy Crude oil, Furnace oil, Natural gas etc

Spices Cardamom, Jeera, Pepper, Red Chilly

Pulses Chana , Masoor and yellow peas

Plantation Arecanut, Cashew kernel, Coffee, Rubber

Petro chemicals HDPE, Polypropylene, PVC

Oil and Oil SeedsCastor, Coconut, Cotton Seed, Palmoline, ground nut, Mustard, Soya, Sunflower, Sesame and Rice

Bran

Cereals Maize

Others Mentha oil, Potato, Sugar

The primary function of the commodity trader, or speculator, is to assume the risks that are

hedged in the futures market. To a certain extent these hedges offset one another, but for themost part speculative traders carry the hedging load. Although speculation in commodity futures

is sometimes referred to as gambling, this is an advance or decline by the same amount. Usually,however, this price relationship is sufficiently close to make hedging a relatively safe and

practical undertaking. In fact, if the future is selling at a normal carrying charge premium at thetime the future is sold as a hedge, the future should slowly but steadily decline in relation to the

cash as it approaches the delivery month, thus giving to the storage interest his normal carryingcharge profit in his hedging transaction. Another example of hedging might be that of a flourmill which has just made heavy forward sales of flour, sales that will require substantially more

uncommitted wheat than the mill owns. To hedge these flour sales, the mill will at the time theflour is sold buy wheat futures equivalent to the amount of wheat needed to fill its forward flour

commitments, and then as the wheat is acquired to fill these commitments remove the hedges.This will protect inaccurate reference. The generally accepted difference between gambling and

speculation is that in gambling new risks are created which in no way contribute to the generaleconomic good, whereas in speculation there is an assumption of risks that exist and that are a

necessary part of the economy. Commodity trading falls into the latter category.

8/3/2019 MCX INTRO

2/2

Everyone who trades in commodities becomes a party to an enforceable, legal contract providing

for delivery of a cash commodity. Whether the commodity is finally delivered, or whether the

futures contract is subsequently cancelled by an offsetting purchase or sale, is of no real

consequence. The futures contract is a legitimate contract tied to an actual commodity, and those

who trade in these contracts perform the economic function of establishing a market price for the

commodity. While speculative traders assume the risks that are passed on in the form of hedges,

this does not mean that traders have no choice as to the risks they assume or that all of the risks

passed on are bad risks. The commodity trader has complete freedom of choice and at no time is

there any reason to assume a risk that he doesnt think is a good one. Ones skill in selecting

good risks and avoiding poor risks is what determine ones success or failure as a commodity

trader.