Multi Commodity Exchange (MCX), India’s leading platform for trading commodity derivatives, on Tuesday announced that it will launch an electricity futures contract from July 10.
This new offering aims to meet the growing demand for tools to help manage the risks associated with fluctuating electricity prices.
Praveena Rai, Managing Director and CEO of MCX, said the new contract would play an important role in deepening India’s energy markets and making them more structured.
She added that the launch would support the country’s goal of achieving a sustainable and market-driven approach to electricity pricing.
The contract received approval from the Securities and Exchange Board of India (SEBI) in June.
As per the rules, the contract will have a daily price limit of 6 per cent, which may increase to 9 per cent on any given day.
Additionally, the initial margin requirement for traders will be at least 10 per cent, or based on volatility, whichever is higher.
There will also be limits on client positions, capped at 3 lakh MWh or 5 per cent of the market’s open interest, whichever is greater.
The electricity futures contract will be available in four contracts for the current month and three contracts for the following months.
The first day of trading will be the first business day of the launch month, while the last day will be the day before the contract expires.
Currently, the Indian Energy Exchange (IEX) controls more than 90 per cent of the electricity futures market. MCX intends to work with spot prices to offer a competitive alternative.
The exchange believes the launch is timely, as India’s electricity sector is growing rapidly and there is a greater need for price stability, especially due to changing demand, fuel costs, and evolving market conditions.
Industry experts believe the new futures contract will help both electricity producers and investors manage volatility and plan future production more effectively.
—IANS