MCX and Financial Technologies

It is really sad that the company that built MCX is now publicly so bitter about the change of platform

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any idea why daily option volumes on MCX are so low after the software transition?

i think that the brokers and algo’s are just being cautious - testing the new system before deploying full scale. They dont want to be caught on the wrong side if some glitch happens

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MCX promoters has let down all the stake holders of National Spot Exchange in hot spot They could have very easily handled the crisis of Spot Exchange. Which was very great idea.

You are correct, the volumes have not reached the levels seen right before the platform switch. But i can see the Daily turnover increasing everyday as the confidence grows.

I do not see any credible reports in Media that highlight any major problem with new software. If there was any real problem, it would have also got reflected in share price immediately. Slow volume ramp-up could be a conscious choice…its more the norm then exception when new software is deployed.

If anyone has any credible report highlighting post go-live problems impacting volumes, request to please share. Would be beneficial to everyone

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UBS gave an upgrade today. But why isnt it being valued at higher multiples?. BSE trades at much higher multiples

slowly MCX would be there. Its not there for 3 reasosn:

  1. 10 years back there were impact because of FTSL
  2. volume growth wasnt great since then
  3. overhang of tech platform.
    all 3 are sorted now .

If it will get re-rated. It should happen now, after this quarter’s results. All the things are going for the company.

MCX results are out. Company posted net loss and the reason citied is Settlement Guarantee Fund and payments made to software vendor (63 moons - 125 cr + taxes for the quater). Assume similar amount will be paid for December quater too. Post that i am assuming payments will be made to TCS only.

Does anyone has any idea on what will be the cost to be paid to TCS? What will be the cost savings by switching to the new platform? Understand that the new platform will be scalable and easily maintainable.

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I think they said no cost in the first year, as it is covered under project implementation cost which will hit capex. After that, annual running costs would be significantly lower (comparatively) but was to be disclosed later. Hopefully in the next earnings call.

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There may be some financial engineering that they may have done with TCS - but the Y1 cost will be recovered from the future years.

key will be the madras court outcome where the opposition has requested that MCX to run both the platforms in parallel for 12 more months

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Mcx does not do weekly options expiry as of now right?

That could be the next growth trigger for it as we have seen with bse and nse

They had mentioned TCS AMC of 8-10 cr earlier(i read this in an article)

Yes - that will be a growth driver. But key to first get resolved is 63Moons issue. For Q1 fees was 80 Cr and for Q2 and Q3 it will be 125 cr + taxes. This is massive. If in Madras high court they loose than 63Moons may charge them 150 cr.

The platform has been performing without any glitches as far as i have heard.
There is no way the court will force MCX to pay such an hefty amount which is almost all of their profit to a company that has already taken full advantage of the situation.

Its just too extreme to make them pay Rs 150 Cr

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Please read the recent con-call. To summarize, on a high level the depreciation cost will be more plus the AMC.


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Q4 FY24 con-call highlights

MCX

Current Performance:

  • The company has successfully managed the entire technology exceptional item related to a payment made to a vendor.
  • Costs are projected to remain stable and not dependent on turnover in the future.
  • The company has capitalized software costs of 237 crores, encompassing servers, networking equipment, and operating and application software.
  • Amortization periods for the capitalized software costs vary, with hardware being amortized over 5 years, networking equipment over 5 years, and the platform over 10 years.
  • An additional depreciation cost of 30-35 crores annually is anticipated due to the capitalized software costs.
  • Direct market access (DMA) has been introduced for foreign portfolio investors (FPIs) category one, with the FPI category two in the pipeline for testing.
  • Transaction charges from options and futures have increased, with 55 crores from futures and 101 crores from options during the quarter.
  • Steel contracts have been launched, and the company is actively involved in setting up a coal exchange in collaboration with M-junction.

Future Outlook:

  • The company is actively engaged with the ministry and regulators for setting up a coal exchange and is eager to venture into this area.
  • Plans are in place for launching options on mini contracts of crude and natural gas and setting up a coal exchange in collaboration with M-junction.
    Concerns:
  • While there has been a decline in active UCCs in previous months and quarters, the company anticipates continued growth in the future.
    Other Points:
  • Significant growth in ADTO and UCC was observed in Q3, with a projected correction in ADT in futures.
  • The company continues to actively pursue the establishment of a coal exchange in collaboration with M-junction.
  • Overall, the company has effectively managed the technology exceptional item and foresees stable costs in the future. It is actively pursuing initiatives such as setting up a coal exchange and expanding its market offerings. Despite some concerns, the company remains optimistic about its future prospect
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