Image Source: The Economic Times
In a landmark move for India’s energy markets, the Multi Commodity Exchange (MCX) will launch its electricity futures contract on July 10, offering a structured tool for hedging price volatility in the power sector. Approved by SEBI in June, this marks the country’s first regulated electricity derivatives product.
Contract Features and Trading Structure:
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Monthly base load contracts available for the current and next three months
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Each contract represents 50 MWh, priced in rupees per MWh with a ₹1 tick size
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Settlement is cashbased, using the volumeweighted average of IEX’s Day Ahead Market prices
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Daily price limits start at 6%, extendable to 9%
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Initial margin requirement is 10% or volatilitybased, whichever is higher
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Position limits: 3 lakh MWh per client or 5% of marketwide open interest
Market Impact and Strategic Goals:
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Aims to deepen India’s energy derivatives market and improve price discovery
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Offers power generators, DISCOMs, industrial consumers, and investors a transparent hedging mechanism
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Supports India’s transition to marketdriven electricity pricing and renewable integration
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Enhances liquidity and risk management across the power value chain
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Positions MCX ahead of NSE, which plans a similar launch on July 14
Why It Matters:
With erratic weather patterns and rising demand, electricity pricing has become increasingly unpredictable. MCX’s futures contract provides a timely solution for stakeholders seeking stability, efficiency, and financial control in a volatile sector.
Sources: Moneycontrol, Business Standard, The Hans India, The Hindu BusinessLine, Investing.com India, Economic Times, MSN India
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