What Is MCX?

5paisa Research Team

Last Updated: 23 Mar, 2022 02:16 PM IST


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What Is MCX?

The full name of the MCX (Mumbai Commodity Exchange) is the Multi Commodity Exchange of India Ltd. The exchange offers crude oil, natural gas, gold and silver, and agricultural products like rice and cotton. The MCX has an impressive market share in India as it processes about 60% of all commodity futures trades in India. MCX also processes about 60% of all commodity futures trades in India.

The MCX was established in 2003 and is headquartered in Mumbai. The exchange offers contracts for future delivery on a wide range of products, including:

1) Agricultural Products: Rice, Wheat, Soybean Oil, Soybean Meal, Cotton, Natural Gas, Crude Oil and Gold.

2) Metals: Aluminum, Copper and Nickel.

3) Energy: Crude Oil and Natural Gas.

4) Currencies: South African Rand, Brazilian Real and Mexican peso.

5) Softs: Coffee and Sugar.

Futures trading is one of the popular forms of trading. In the simplest sense, a future is a contract between two parties to buy or sell an asset at a specific price.

What Is MCX Market?

The Multi Commodity Exchange of India Ltd. (MCX) is a commodity exchange in India. A commodity exchange or bazaar is a central marketplace for the trade of agricultural and often volatile foodstuffs. In ancient times, farmers would sell their excess produce at marketplaces for immediate payment, typically with a handshake as a contract.

Later, commodities exchanges evolved with the use of standardized contracts and formal trading terms. They have come to be regulated by governments in modern times, with trading facilitated through a network of stock exchanges and futures markets operating around the clock.

It offers commodities trading in gold and silver bullion, industrial metals, energy and soft commodities such as cotton, crude oil and natural gas. The exchange has 12 commodity groups: gold, silver bullion, industrial metals, energy and power, agricultural markets including grains and oilseeds, soft assets including cotton and rough rice, Agri inputs including fertilizers and metals derivatives such as copper and nickel.

In addition to these groups, commodities like white sugar & refined sugar are also traded.

What Is MCX Trading?

MCX's product offerings include futures contracts on all the products mentioned above apart from the index-based products - Gold Bullions Index - Gold Mini Future & Silver Bullion Index - Silver Mini Future.
The Multi Commodity Exchange of India Limited (MCX) is a commodity and futures trading exchange for various commodities, including gold, silver, wheat, rice, cotton and sugar. It is the second-largest exchange in India by turnover.

The Multi Commodity Exchange (MCX)'s core business is trading in commodities. Credit rating agencies like CRISIL, Fitch Ratings and India Ratings started rating the viability of the product. Credit rating agencies are independent entities that rate issuers' creditworthiness based on the historical performance records of issuers and provide an opinion about the likelihood that the issuer will be able to repay its debt obligations on time.

The MCX seeks out AAA+ ratings for the new products, given their unique features. The new products will allow easy access to commodity markets by banked and unbanked customers, without any physical intervention of cash by depositing or withdrawing money. It is expected to attract retail investors who so far do not have exposure to commodity markets.

MCX Meaning in Commodity Trading

M.C.X. or Multi Commodity Exchange of India is a futures and options exchange based in Mumbai, India, specializing in commodities and derivative instruments trading. It was formed in 2003 and is the only commodity exchange in India based on the multi-commodity system (MCX). MCX is an electronic exchange that provides online trading services for commodities contracts, except for rice.

The MCX also offers the following services:

1) Commodity derivatives trading.
2) Futures trading.
3) Options trading.
4) O.T.C. or Over-the-counter trading.
5) Domestic and international trade financing.
6) Mining services.

The primary purpose behind the formation of MCX is to provide commodity futures trading in the global market. From the year 2003 till date it has become very successful in achieving its goals. It has provided many facilities to its members and visitors that include trading in fresh commodities, providing information about market trends, research reports on various commodities traded in the exchange, development of new applications, etc.

Features of MCX in Indian Commodity Trading

MCX is an amalgamation of several exchanges in India. It has a good reputation in the Indian market due to its high-quality standards, transparent trading systems and well-organized operations.

It is one of the most advanced commodity exchanges in the country and was formed with a vision to provide a robust and transparent platform for trading and clearing commodities.

The MCX is at the forefront when it comes to offering derivative contracts in commodities in India. The platform provides different kinds of contracts depending on the type of commodity being traded in the exchange. Some of these are futures, options, swaps and forwards.

It is also committed to building a state-of-the-art infrastructure that will become the benchmark for other exchanges in the region.

The derivatives market has been largely unregulated in India, due to which manipulation is quite common in this market. It has harmed many small level traders who invest their savings into these markets to earn quick money. The regulators have taken measures to control these manipulations in recent times and have closed down many illegal trading activities that were going on here earlier.

Wrapping Up

At present, MCX is the most modern, high-tech and customer friendly exchange in the country. It has taken the lead in introducing many innovative products for trading, thereby catering to the needs of all significant trading communities across the country.

The platform offers different kinds of contracts depending on the type of commodity being traded in the exchange. For example, there is a futures contract for gold, natural gas, crude oil and silver. Swaps are offered for gold and oil, while options are also available for various commodities, including gold, silver, and cotton, wheat, and soybean.

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