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MCX plans 3 spot exchanges for base metals, gold and natural gas
It is not clear at this stage if the government will allow the three spot exchanges to function as separate divisions of the same entity, or if they will have to function as individual subsidiaries.
Multi Commodity Exchange of India (MCX) is planning to set up three separate spot exchanges for gold, base metals and natural gas, a source familiar with the development told Moneycontrol. The exchange is talking to government bodies, including GAIL, for the spot exchange for natural gas.
“A government-appointed committee on gold spot exchange has submitted its report,” the source said.
“MCX will face competition from BSE as the Indian Bullion Jewellers Association has tied up with it for setting up a gold spot exchange,” the source said.
The exchange is now waiting for regulatory approvals. It is not clear at this stage if the government will allow the three spot exchanges to function as separate divisions of the same entity, or if they will have to function as individual subsidiaries.
Gold Spot Exchange
The guidelines for the gold spot exchange are yet to be finalised. For MCX, gold contracts generate the second-highest volumes in the futures, after silver contracts.
Natural Gas Spot Exchange
MCX is looking to capitalise on the government’s plan for spot exchange for natural gas as a hedge for domestic consumption. Currently, natural gas accounts for only 6-7 percent of India’s primary energy mix, which also consists of other fuels like oil and coal, against a global average of 24 percent.
According to the MCX road map, the exchange may come up at International Financial Services Centre, GIFT City, Gandhinagar. Sources said that MCX is in talks with several stakeholders for a tie-up, including Gas Authority of India (GAIL). India Energy Exchange (IEX) is also a contender for the natural gas spot exchange.
With regards to a base metals exchange, the MCX has lined up copper and aluminium in the first phase, subject to regulatory approvals, the source said.
MCX is likely to stay away from currency futures trading as this category is not profitable enough. BSE, National Stock Exchange and the Metropolitan Stock Exchange of India are the dominant players in this segment.
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