I think a merger without expending cash is far more likely.
It is very difficult for MCX to compete with both NSE and BSE. Until that risk is priced in, I cant get myslef to take a position. Love the business and the model, just dont think they can hold off both of them without straining themselves.
Few points relevant to universal exchange in MCX concall -
They are planning to focus on currency segment rather than equity. (no equity as of now).
Predatory pricing by BSE or any other competitor in order to get commodity volumes will not impact them much; though, they might have to bring down their pricing (but not to the predatory levels of the competitor). Volumes do not go away just because of pricing. (i think MCX mgmt is denying there will be any impact, but when an exchange offers a whole bunch of services under the same umbrella, the offer will make sense to the members).
Regarding upcoming mergers/acquisitions, he refused saying “none that i am aware of”. (was expected).
Was fiddling with charts, MCX may have bottomed out …
There is a 3 year old support line at around CMP, and the price action has been caught in another desending tringle pattern second time since 2015-2016…
the present descending triangle has a short term component B and longer term component C…
It will be vital to note what happens at this crucial support level, hopefully it will not be broken…
The last time similar even happend the price went up by 88percent…
Disclaimer…Not invested, watching to take position
I’m long at approx avg price of 723. The reasoning is very simple
At approx 4000cr mcap - you can’t build another exchange which will replace MCX and gain meaningful volumes
It has approx 90% share in a winner takes all market
Requires no more capital infusion till perpetuity
Can be run by a dumb management, high IQ not required
Willing to buy more as price drops.
Arguments against buying: http://alphaideas.in/wp-content/uploads/2014/09/Why-I-Still-Dont-Like-MCX.pdf sums it up. Though, I don’t feel so strongly against MCX. It’s not really comparable to the likes of VST or casinos. I have friends who are trading metals and they need MCX to hedge. They don’t take delivery, but that’s beside the point. Hedging is crucial to business and MCX is the only way.
Disc: Long, biased
On your point on “Umbrella of offerings” by competition, my view is that the trading happens through a broker (online or otherwise). Now the broker terminal will have quotes from all exchanges. For example, if all 3 exchanges allow trading of “gold”, the broker terminal will offer quotes from all 3 exchanges. Now when this happens, exchange with higher liquidity will be able to offer better prices to both buyers and sellers. In commodity trading, MCX happens to be the exchange with 90% volumes. Accordingly I believe that “umbrella of offerings” will not make much impact.
I am looking forward to feedback on above line of thinking to build my conviction
What i think is you have to think in terms of what fraction of cost of trade is taken by exchanges ? If its insignificant then BSE & NSE won’t be able to attract anyone by giving it even for free.
If the cost is significant then you will for sure going to see a trade war, what we saw in telecomm with jio ( market share can be gained by giving it away for free). It’s hard to tell but if this happens then other exchanges have nothing to lose (Cost of setting up & running is nothing for BSE - said in conf call) and MCX has everything to lose.
I agree with this statement. I looked at MCX initially but studying it, i thought, BSE is capable of disrupting it big time.
MCX is defending here and BSE attacking.
Discl: Invested in BSE
Can anyone list down step by step what is the process n skills of 1. Running a commodity exchange 2. Participating in trading on a commodity exchange. I am sure it is much different from an equity stock exchange. I think a detailed understanding of this will clear lot of doubts. The least I ve understood is it’s not as simple as it looks . Things like ware house mgmt r different from equity. Would be glad if some one can provide detailed understanding
I can’t deny but I think pricing matters less. Volumes bring liquidity, if volumes are less, spread will go up. Traders will lose more on spread. If this is that easy, why NSE is NSE ? I think market will increase with new entrants. If market share has to go, it will go slowly slowly with time. In this time consolidation will happen in industry as a logical conclusion as MCX shareholders will not give up that easily.
I think, full merger with NSE is logical conclusion to save business.
Here i think MCX is playing with great master strokes. The permission for which they are asking for future contracts will get them into monopoly at an international level. Their plan for setting up spot exchange is tough too after NSEL scam but still there is room for success keeping in mind the market share. Besides this, @AmitContrarian i think having a good team & HR is also a great cost(for BSE) for the business especially like MCX India. Also looking at the volumes i think it will be tough for BSE to compete further.
MCX looks very attractive due to fall in price. Volume is increasing, Q4 result may surprise us. Added some more quantity.
Does anyone know why asset turnover has reduced to 1/3rd of its historic avg and why employee salary has grown from 7% of revenue to 25% of revenue?
Sometimes i feel is purpose of such articles is to hide the big positives and create more panic. Gold is one of the many items traded on MCX. If we see January data, almost each and every segment has shown good double digit YoY growth on all metrics including ADT,TC,TV. Considering the low base impact of demonetization and now slowly impact of GST going away, look like 20% YoY growth should be on the cards.
Some numbers to chew from MCX website itself for Jan’17 vs Jan’18:
Disc: Recently invested and accumulating. Yet to find lot of answers
Edit: Above point was just to highlight many times media give extreme n sensational news on either side without balancing things. Nothing against the content.
There’s a lot of respectable value investors on this thread who are invested in this business. But I just can’t shake off the feeling that MCX is a great short. With only 1% delivery based trading, it really doesn’t have any moat. From October, BSE will attack with all its might to gain new business, and MCX has to protect it’s existing business. Its either win-lose or lose-lose situation for BSE-MCX respectively in the near term.
Once BSE establishes it’s commodity trading, one can hypothetically shut down MCX and all trading will seemlessly move to BSE from the very next day. Why will anyone miss MCX?
I see very low probability of this happening but true there is a probability that it can happen which makes me worry the most.
Another aspect of the commodity trading segment in India is how much of it will develop in IFSC, which has no CTT, STCG, STT, DDT, and foreign currency denominated contracts etc.
With FPIs being allowed entry into commodity trading in IFSC, it could be a good tailwind for the business to develop in IFSC. For AIFs the initial battle will be between impact cost of liquidity and tax benefits from shifting to IFSC.
Any one knows the volume of commodity future contract trading in BSE INX ?
This just has the 2 days of data. Looking for historical. Could not find anything in their Feb. investor presentation and annual report which was last years.