MOSL: MCX (Buy)-Multi-faceted reforms have only just begun-Key takeaways from India Commodity Day hosted by MCX

​MCX: Multi-faceted reforms have only just begun; Key takeaways from India Commodity Day hosted by MCX

(MCX IN, Mkt Cap USD0.7b, CMP INR952, TP INR1300, 37% Upside, Buy)

We attended the ‘India Commodity Day’ hosted by MCX on its 14th Anniversary. The session saw a speaker representation from MCX’s senior management and also prominent members of the ecosystem. The discussion focused on a range of topics, such as the steps taken by the regulators and the way forward, the idea of commodities as an asset class, and commodity price outlook. Some notable highlights from the event:

-Unexplored market in the context of physical underlying: Commodities are an important cog in the wheel of an emerging economy like India, and commodity derivatives have a huge potential in such a market. With only a fraction of that opportunity explored so far, the bigger possibilities are still to be unraveled. Considerable efforts have gone by both – the regulators and the exchanges – in this direction.

-SEBI has been on a reform spree, more to come: After the SEBI took over as the regulator of commodity derivatives from the FMC in September 2015, the segment has seen a plenty of action on the policy front over the last two years. Some of the notable reforms include: [1] Risk management – settlement guarantee funds, position limits, [2] Warehousing norms, [3] New products (options), [4] New participation (Category-3 AIFs), [5] Setting up of separate clearing corporations (underway), and [6] Integrated commodity derivative and equity markets – phase 1 of which was broker integration, which has helped reduce cost of trading and facilitated ease of doing business.