MCX and Financial Technologies

Q2’21 Q1’21
Row Labels Average of Total Value (Lacs) Row Labels Average of Total Value (Lacs)
FUTCOM 25,49,415 FUTCOM 27,70,821
FUTIDX 30,244 FUTIDX 32,234
OPTCOM 0 OPTCOM 1
OPTFUT 6,02,254 OPTFUT 1,89,972

If you look at the above the options turnover has jumped significantly. While the futures have taken a hit because of leverage going away from the markets. Q2 is on track to be better than Q1 (hopefully the company is monitising options trading)

  • Jhunjhunwala exits before the results
  • Too many resignations at senior level
  • Disastrous Q2 Results

End of the road for any near term visible growth triggers for MCX ?

3 Likes

HDFCsec has updated its coverage report on MCX. It aligns with the thesis of further growth in options in Oct’21 and Nov’21. Would be interesting to watch this quarter results if gains from charging options contract makes up for loses from consistent drop in futures volume.

Some other potential triggers (shifting to its own software platform, permission to domestic financial institutions & offshore managers to participate in commodity markets, launch of futures on indices listed etc.) are still way out in future.

Disclaimer: Not invested, tracking for any future potential

Justified , if I see the chart technically, but I firmly believe there is a growth story which is intact there, if we believe in the growth story of India at a macroeconomic level then such commodity derivatives platform will be sustaining a YOY growth

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Was just reading about the whole nickel short squeeze in LME one of the largest comodity exchange.

Will this affect the long term view on MCX as many investors and specially who look it as an hedge might start to look comodity trading more stringly

Some link to understand

Article
https://www.google.com/url?sa=t&source=web&rct=j&url=https://www.moneycontrol.com/news/business/markets/nickels-short-squeeze-exposes-chinks-in-the-lme-market-8241681.html/amp&ved=2ahUKEwjHsdK1wNL2AhXmSfEDHVccA6gQ0PADKAB6BAgEEAE&usg=AOvVaw3zzxsnvd0tIrTTOqz4GkZh

Video

Q4’22 Q3’22 Q2’22 Q1’22
Row Labels Average of Total Value (Lacs) Row Labels Average of Total Value (Lacs) Row Labels Average of Total Value (Lacs) Row Labels Average of Total Value (Lacs)
FUTCOM 2,621,569 FUTCOM 2,380,229 FUTCOM 2,549,415 FUTCOM 2,770,821
FUTIDX 35,339 FUTIDX 38,160 FUTIDX 30,244 FUTIDX 32,234
OPTFUT 1,534,365 OPTCOM - OPTCOM 0 OPTCOM 1
Grand Total 1,397,091 OPTFUT 847,929 OPTFUT 602,254 OPTFUT 189,972
Grand Total 971,067 Grand Total 795,478 Grand Total 748,257
Q4’21 Q3’21 Q2’21 Q1’21
Row Labels Average of Total Value (Lacs) Row Labels Average of Total Value (Lacs) Row Labels Average of Total Value (Lacs) Row Labels Average of Total Value (Lacs)
FUTCOM 3,149,417 FUTCOM 3,271,253 FUTCOM 3,803,399 FUTCOM 2312852
FUTIDX 33,052 FUTIDX 29,679 FUTIDX 26,080 OPTFUT 65058
OPTCOM 29 OPTCOM 2,862 OPTCOM 679 Grand Total 1,188,955
OPTFUT 114,039 OPTFUT 79,969 OPTFUT 114,681
Grand Total 833,473 Grand Total 845,941 Grand Total 1,184,309
![image 690x174](upload://cdifeakZZisLix6uXZAQmOn1Cbd.png)

Option Trading is picking up in MCX finally.
In Jan they did a prem turnover of 4.4k crs meaning a revenue of 2.2crs
In Feb they did a prem turnover of 7.7kcrs translating in revenue of 3.7crs
March data is awaited.
From this I can estimate the at the revenue will be higher by 15-18% this qtr over last qtr.

4 Likes

Very useful Vikas - and your revenue estimate is probably conservative if we assume that volatility / prices for key commodities was even higher in Mar (of course I am assuming that the greater the volatility the greater the likely trading - which may not be true).

What is the source of the information above - would be interesting to track.

Disc. Invested so likely to be biased

I got the data from MCX historical data page.
Higher volatility would lead to higher margins which inturn would reduce trading. I heard that the peak margins in Nickel went to 120%, such moves are very bad for the contracts in the long term. That is what happened in Crude a couple of years back and the same hasn’t been able to recover yet. If you look at the ADV its up by around 10% but the commodity prices have gone up more than that meaning the quantity traded has gone down.

1 Like

Looking at ADT - there seems to be a substantial bump in Futures for 14 days of March (also options continues to remain strong). Drivers seem to be crude oil, silver and gold - if I have interpreted the data appropriately

ADT (lacs) Jan Feb Mar
FUTCOM 2,242,898 1,511,177 3,175,191
FUTIDX 35,063 40,813 27,915
OPTFUT 1,044,257 2,557,987 2,345,815
![image 690x90](upload://49aQ7INF80UbFNoX8PswXagDgTp.png)
2 Likes

As I had earlier expected the average turnover fell after adding the data for the remaining period.

Q4’22 Q3’22 Q2’22 Q1’22
Row Labels Average of Total Value (Lacs) Row Labels Average of Total Value (Lacs) Row Labels Average of Total Value (Lacs) Row Labels Average of Total Value (Lacs)
FUTCOM 2,605,045 FUTCOM 2,380,229 FUTCOM 2,549,415 FUTCOM 2,770,821
FUTIDX 31,878 FUTIDX 38,160 FUTIDX 30,244 FUTIDX 32,234
OPTFUT 1,506,548 OPTCOM - OPTCOM 0 OPTCOM 1
Grand Total 1,381,157 OPTFUT 847,929 OPTFUT 602,254 OPTFUT 189,972
Grand Total 971,067 Grand Total 795,478 Grand Total 748,257
![image 690x64](upload://hpZMw5cBIpUACQAmpJ8Z1Sr6n4P.png)
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Resignation of CRO, Mr. Golecha due to ill heath and personal reasons.

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Company told exchanges that everything regarding the tech transition is shared with investors in concall. There is nothing else to be shared.

IMO mcx management is very transparent. They upload transcripts of analyst meets also. I haven’t seen any company doing that. Sometimes such media reports are speculative in nature.

On the business front Volume of Options is increasing month over month rapidly while Futures volume is constant more or less.

On technical charts 1275 seems to be a good support for short term.

Disclosure: Invested and biased.

2 Likes

Once the tech transition to TCS is completed which is to be done by q3fy23 the Depreciation will increase but software charge will reduce. Combinely there will be some cost saving on depreciation+software charges But the main part is there won’t be any charges on the revenue which 63 moons is charging as of now. So once the tech transition happens and as revenue increases based on Options volume increase operating leverage will play out.

2 Likes

the contract b/w 63 moons and mcx is no longer carried ahead. official circular
https://www.google.com/url?sa=t&source=web&rct=j&url=https://trendlyne.com/get-document/document/pdf/965529/&ved=2ahUKEwi0n7HivLL6AhV6ALcAHYcIDjEQFnoECAkQAQ&usg=AOvVaw0Uh-JifS528FB2abNCUZCx

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Software services contract with 63 Moons extended for 3 months.

Disclosure:Invested.

Mcx result is awesome. revenue at 143 cr pat up 50% qoq. I calculated a revenue of 119 cr this quarter! this is epic!! the price volume of the stock didn’t price it in

small correction: I thought operating revenue will be 119 cr based on monthly data they publish. the operating revenue came to be127 cr. and 18 cr is other income. overall good result. If Options volume explode like this the operating revenue will increase only and we might see some more operating leverage playing out. Unless the other income part doesn’t betray :sweat_smile:

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MCX profit is likely to take big hit for Q3 due to the exorbitant license fee extension for the quarter from 63 moons. Chances are high MCX might post a loss for Q3 on this one time expense.

Anyone has visibility on how is the progress on their new software testing and parallel run? Let us hope they switch to the new software by 1st Jan, else their will be acute short term pain in this counter.

that is a big statement that they will post loss. can you verify your source?

The market is factoring in a 40-50 Cr hit for Q3. Its a known event and in the price. Few brokerages have assumed between 35-40% licese fee increase next Q. in H1 23 Crs was paid to 63 moons.