Worst is over for MCX, will see revival in company: PK Singhal, MCX

In a chat with ET Now, PK Singhal, President & Whole Time Director, MCX, says volume has slightly increased by about 5%. Excerpts:

ET Now: All the expectations that people have about some different options being allowed, FIIs being allowed, out of the blue comes this move of SEBI indicating that they are allowing weather derivatives. What is your take on how would a commodity exchange will benefit out of such a move?

PK Singhal: I would like to keep my fingers crossed because as far as we as a exchange is concerned, we are not of purview to any such move from SEBI. As far as preparation of weather derivative is concerned, you may be aware that from 2005 MCX is giving a rainfall index based on the Colaba, Indore and Jaipur. There are a lot of issues relating to the weather derivatives. In CME, there is a temperate index, they have this for European countries, Australia and USA. We have some tie ups with CME people. I had a discussion with them some time back and they were not very hopeful that this weather index will be successful. In India there are a lot of concerns especially on agri commodities on the rainfall, so probably at MCX we have an internal feeling that rainfall index will be successful. That is why from 2005 onwards we had been disseminating the information about the rainfall index based on the Colaba, Jaipur and Indore. But there are a lot of other issues as well. The reason is IMD. There are a lot of people who are providing this type of facility to the insurance companies but the question is more of a sanctity market acceptability. So if the details are given by IMD directly then the contract will be having more sanctity. But as per the discussion we had with IMD, they are not open to provide this information for commercial use. There are lots of people with whom we already have a tie up, from whom we are getting this index developed.

ET Now: So according to you weather index will not be a big business proposition and it will be difficult to implement. So I am just going to talk about the big picture and the big picture for the commodity market is…

PK Singhal: I am not saying that it does not have big potential because in India a lot of agri commodities are dependent on the rainfall index. So probably the question arises. I am not saying that there is not a good potential for rainfall index or temperature index, but the point is a lot of work has to be done. I am not saying that there is not a potential. You are aware people are doing a lot of bidding on based on the rainfall in small villages.

ET Now: So potential is there, implementation is something which needs to be sorted out. I am going to move on and talk about what is going on in the commodity world. Commodity prices have been volatile, first they cracked, now they have recovered. So given that how volatile commodity markets have been, what is happening to MCX volumes?

PK Singhal: As far as MCX is concerned, from the last one year I am saying worst is over for MCX. In the calendar year 2015, there is layout size or contract size, there is a growth of 61% and our market share is about 84% which is used to be at the peak. In the last quarter of 2015-2016, the market share was about 89%. Despite the fall in prices in financial year 2015-2016, our volume has slightly increased by about 5%. If the prices of commodity increases, we expect that there will be a good growth. As a self regulatory body, we need to be more concerned about our surveillance investigation and other basically regulatory functions. So as far as MCX is concerned, we have strengthened our system, we have asked for the SEBI coming in as a regulator. SEBI has desired that the various regulated department should also have some additional staff so those staff we are recruiting. So as far as MCX is concerned we feel that everything is fine.