Multi Commodity Exchange of India Ltd. will launch electricity futures contract on July 10. The bourse received approval for the derivative product from the Securities and Exchange Board of India last month.
“MCX believes this launch is timely, as the electricity sector is witnessing significant growth with a need to manage price stability, fluctuating demand, fuel costs, and market developments,” a press statement said on Tuesday.
The electricity futures contract will help power generators, distribution companies, large industrial consumers, and financial participants with a transparent, liquid, and reliable hedging mechanism. It will also promote investors with a widely used commodity to add to their portfolio, the company said.
“The launch of Electricity Futures reaffirms MCX’s commitment to building innovative and forward-looking products that address real market needs,” said Praveena Rai, chief executive officer and managing director.
Notably, the National Stock Exchange will launch electricity futures trading from July 11 along with a special Liquidity Enhancement Scheme to encourage active participation. These contracts, available on a monthly basis, are aimed at helping market participants manage price risks in the power sector.
About MCX Electricity Futures
The MCX Electricity Futures contract will be available for all 12 calendar months of the year, with trading initially open for the current and next three months, according to the statement.
The trading unit is 50 MWh, quoted in Indian Rupees per MWh (excluding taxes and levies), with a tick size of Rs 1 per MWh.
The contract will be cash settled based on the Volume Weighted Average of the Unconstrained Market Clearing Price of the Day Ahead Market at the Indian Energy Exchange Ltd., for all calendar days in the expiry month.
The contract will follow SEBI’s Daily Price Limits for market stability, with an initial slab of 6%, extendable up to 9% on a given day.
The initial margin requirement is a minimum of 10% or volatility VaR based margins, whichever is higher.
Client level position limits are capped at three lakh MWh or 5% of the market-wide open interest whichever is higher.
MCX Share Price Today
Shares of MCX were trading 3% lower at Rs 8,470.5 apiece on the NSE as of 2:31 p.m., compared to a flat Nifty 50. The stock has risen 114% in the last 12 months and 24% so far this year.
Out of 11 analysts tracking the company, seven maintain a ‘buy’ rating, three recommend a ‘hold’ and one suggests ‘sell’, according to Bloomberg data.
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