InvestorQ : What are the new index futures being launched by MCX and how to trade in them?
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What are the new index futures being launched by MCX and how to trade in them?

Answer
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3 months ago


Multi Commodity Exchange (MCX) will launch index futures on gold bullion and on base metal indices. The idea is to broaden and also to deepen the market. The idea here is to get participation from institutional players like mutual funds and arbitrageurs and over time from foreign institutions too. The two indices on which the futures will be launched are iComdex bullion and iComdex base metals. The first expiry of bullion index futures will be in August 2020 while the base metals futures will expire in October 2020. The index futures contracts will be mandatorily cash settled only. This is in contrast to the individual commodities which have to be settled by delivery. Bullion index will constitute of gold and silver while the base metals index will comprise of five base metals. The minimum margin for these contracts will be 5% and these margins will increase gradually depending on the volatility of the price. MCX has a 94% commodity trading market share with a daily turnover of Rs.32,000 crore. However, this index is likely to reduce the risk for retail traders as they are not vulnerable to just one commodity. This risk became all the more pronounced after the crash in crude oil contracts in April.