LETTER FROM THE CHAIRMAN
Having successfully navigated through the turbulent times during the year 2016-17, I am happy to state that MCX''s performance in terms of its business and financial results from operations for FY 2017-18 has been satisfactory. We are excited about the opportunities that lie ahead and remain committed to encash the same and further improve our overall performance.
For the year ended March 31, 2018, MCX''s total income stood at Rs, 34,620 lakh, as against Rs, 37,587 lakh in FY 2016-17. The decline is primarily due to decrease in treasury income. Transaction revenue during FY 2017-18 was Rs, 23,892 lakh, a 2.5% increase from Rs, 23,304 lakh in the previous fiscal, despite limited price volatility in many commodities for the major part of the year. On the operational side, MCX clocked an average daily turnover (ADT) of Rs, 21,193 crore (single-side) in futures during FY 2017-18, while the ADT (notional) in the options segment, which was launched on October 17, 2017 was Rs, 89 crore.
As a result of continued focus on products and market services, MCX could maintain its leadership position with a market share of 89.58% during the year 2017-18. Likewise, your Exchange continued maintaining a high rank among global commodity futures exchanges during 2017, occupying the 7th position, as per data compiled by Futures Industry Association.
The achievements in the past year give us optimism about our capabilities to tap the opportunities available and address the challenges that lie ahead. During the year 2017-18, MCX became India''s first exchange to launch commodity Options when it launched Options on gold futures on the auspicious day of Dhanteras in 2017. Subsequently, Options on futures of silver, crude oil, copper and zinc were also launched. The decision made by the Government of India to substantially reduce transaction tax on exercise of Commodity Options made trading in the product more attractive.
MCX partnered with Thomson Reuters and launched the Thomson Reuters-MCX India Commodity Indices (iCOMDEX) during the year. We hope to launch contracts on indices, once SEBI approves derivatives on intangibles such as commodity indices.
During last year, Multi Commodity Exchange Clearing Corporation Limited (MCXCCL) received an ''in-principle'' approval from SEBI for commencing operations. A well-capitalized clearing entity, distinct from the exchange, helps in building confidence of exchange participants, particularly institutions having large positions. This would enable MCX to attract institutional participants to trade on its platform once permitted by SEBI.
On the participation front, the year 2017-18 was a watershed year as several significant regulatory changes were undertaken to bring in new categories of institutional participants in the market. Category III Alternative Investment Funds (AIFs) were allowed to trade. Banks were allowed to become Professional Clearing Members (PCM), while their subsidiaries were allowed to offer broking services in commodity derivatives. Brokerage houses were allowed to integrate their entities across commodities and other asset classes under a single license. SEBI also floated a discussion paper for enabling participation of Mutual Funds and Portfolio Managers in the commodity derivative markets. We believe that the entry of institutional participants will spur retail participation and ease the access of small stakeholders, including the hedgers, to the hedging and investment platform of commodity exchanges. Besides, financial institutions, by leveraging on their geographical reach, research expertise and capital strength can enable more efficient price discovery and take the benefits of the commodity markets to more participants. At the same time, we are confident of meeting any challenge thrown up by the possible entry of existing stock exchanges in the commodity space. With our leadership position in products, technology and human resources, we should be able to effectively thwart such possible future challenges, while at the same time, keep exploring the emerging opportunities in the changed regulatory landscape.
The Indian economy is undergoing a number of transformational changes. Various sectors of the economy are expanding fast. New industries are emerging. Commodity markets, as an integral part of the economy, too are expanding in response to the demand for commodities and provide a platform for risk management and price discovery of commodities. The commodity derivatives market is itself under doing a metamorphosis with introduction of new products and participant categories, opening up new vistas of presenting commodities as an investible asset class. Together with enabling policy developments, such as introduction of GST, the scope for expansion of this market is truly large.
MCX is cognizant of the opportunities unfurling in the emerging scenario in India''s commodity markets, especially those created by recent policy enablement’s in the broader commodity ecosystem. MCX is confident of its capabilities in unlocking these possibilities. With a number of new and innovative products, stress on continuous improvement and an established culture of serving its stakeholders, your Exchange is aiming at attaining greater heights and achieving the next stage of its growth.
Chairman (DIN: 02726077)
July 20, 2018