MCX shares to gain further as SEBI flags off options

The MCX stock has moved up close to 20 per cent so far this week to ₹1,247. The news on Tuesday of increase in transaction charges by the exchange was given a thumbs up by the market as it would help boost the exchange’s revenue.

Transaction charges on non-agri commodities have been increased by about 25 per cent. Charges on agri commodities have risen even higher from a dual rate of 75 paise a lakh for turnover up to ₹20 crore and 50 paise a lakh on incremental turnover above ₹20 core to a flat ₹1.75 a lakh/ turnover.

In 2015-16, the exchange’s operating income was ₹234.9 crore (vs. ₹222 crore in 2014-15, up 6 per cent), of which ₹202.8 crore was income from transaction fees. The net profit (after tax) declined by over 60 per cent (to ₹41.8 crore) due to provision for diminution in investments in Metropolitan Stock Exchange and transfer to investors protection fund (for previous years) on regulatory requirements.

In the recent June quarter, the company managed a 12 per cent increase in operating income over the same period last year.

The stock will be in action on Thursday again as SEBI on Wesnesday flagged off options in the commodity derivatives market.

Availability of option contracts may see more participants come to the market. Unlike in futures, the loss is limited under options contract. Additionally, CTT will apply only on the option premium, it will be a lower outgo for a trader for a similar exposure in futures (where the tax is applied on the total contract value) making it an added attraction for traders.

MCX is the only listed commodity bourse today. It claims a total market share of 84.3 per cent in the Indian commodity derivatives market. The exchange’s stock hit a low of ₹725 in February this year.

Introduction of options may open the floor to new traders and shore up volumes for MCX. However, given that NSE and BSE may too be soon opening up commodity platforms, there is going to be an inevitable increase in competition and fight for a bigger pie of the market between the players.

The increase in transaction charges by MCX will buttress revenue growth immediately, but, again there may be some loss in volumes, if some clients are discouraged due to increase in cost.