Hope to see very good participation in crude and natural gas contracts: Rishi Nathany, MCX

"In gold and silver, RBI made a mandate that domestic hedging is the only way out and that is why in gold and silver the volumes went up. So if there is a regulatory mandate for corporates especially listed corporates to mandatorily hedge a certain portion of their exposure on Indian commodity markets, I am sure that the overall participation in these markets will go up dramatically," says Rishi Nathany, Chief Business Officer, MCX.

You have launched mini contracts in zinc, aluminium, lead and natural gas. Tell me, what kind of increase are you seeing in the daily average turnover or likely to see because of this?
We have launched mini contracts, aluminium, lead and zinc. Crude and natural gas we are going to launch tomorrow. And as far as volumes are concerned, it is early days yet but we are seeing very healthy participation across the board especially in the base metal contracts because they were launched earlier. And now with the crude and natural gas contracts coming in, we hope to see very good participation going forward. In terms of percentages every contract has different percentage of participation in the minis as compared to the large ones.


Why is it in India the market in a sense is only centred around three-four large commodities; it is gold, silver, crude, it is not expanded beyond that. I mean, commodity exchanges are now almost 20 years old but still the four favourites are the one which account for what 80% market share?
Well, the reason for the lack of widespread participation is that, one we try to introduce as many contracts as possible and so do other exchanges. However, the value chain or the industry needs to come out and hedge more on the domestic exchanges that is one reason why industrial hedging is not so prevalent in India.

In gold and silver, RBI made a mandate that domestic hedging is the only way out and that is why in gold and silver the volumes went up. So if there is a regulatory mandate for corporates especially listed corporates to mandatorily hedge a certain portion of their exposure on Indian commodity markets, I am sure that the overall participation in these markets will go up dramatically.


But tell me, so far, what kind of reception have these mini-contracts received?
Very good reception. Aluminium we are doing an average daily turnover of around 35 crores single-sided. In lead around 5 crores, in zinc mini around 105 crores and crude oil mini again 105 crores.

What is the international market for some of these commodities? I mean, I am not comparing with LME but I am just trying to understand that what is the scope of opportunity for these mini-contracts?
The scope is huge because the mini-contracts are more relevant for the MSMEs, for small hedgers, for smaller investors. So there is a whole different segment which these mini-contracts cater to and that is why the demand for them was there in the market and that is why SEBI thought it prudent to allow them to be brought back. We had them earlier, and now since SEBI allowed we have been bringing them back one by one. And internationally, also you see that there are mini-contracts by various other international exchanges so there is always a segment for larger contracts as well as the smaller contracts.

For example in gold and silver also we have multiple variants even in India. So there are people who would want to trade different variants according to their requirements.


The tech transaction on TCS potentially could delay the extension of a contract to 63 Moons. Could you spell the timeline on the compensation of the tech transaction?
Well, we are working on it, and as soon as we are ready to bring it to market, we will definitely inform the market. Beyond that, I cannot comment much.

A timeline at least?
Well, we have extended the agreement with 63 Moons till 30th June, and we hope to bring it before that.

I also wanted to understand if the liquidity and the market depth you think, has improved because of FPIs coming into commodity derivatives.
FPI circular has just been issued by the end of last week and they are still to start trading on the exchange platform. So since we have issued the circular end of last week, now FPIs should hopefully start on-boarding and going forward we should see the trading start. Then only we will be able to comment on the volume and liquidity that they bring into the markets.

Also wanted to understand whether, there are any other sectoral developments you think which can impact both the business per se and the volume outlook for the industry. I just wanted to understand whether there are any other triggers in terms of anything that you think could impact the business positive or in a negative way going forward.
See, positive impacts will always come from more robust products and more participants coming into this market because more products will allow more and more people to join the market and more products and participants will increase overall liquidity and depth. Having said that, I believe that the commodity markets have only one way to grow, which is upwards and that, they are coming of age while we are 18 years old or 19 years old in India but still we have a long way to go.

Equity markets are very old because of historical reasons. Commodity markets, the electronic trading or the regulated commodity platforms were not there till about 19 years back before that. So, it will take time for any market to mature and as you are seeing, our overall liquidity, participation, volumes, everything has gone up in the recent years.