what-is-mcx

What is MCX in Share Market?

What is MCX in Share Market?

MCX, called Margin Commodity of India Limited, is similar to BSE and NSE, where several essential commodities like gold, silver, and agricultural commodities are traded effectively.
It is a commodity platform for all the traders to process online trading and clearing future commodity transactions by providing a platform, especially for risk management.
MCX has its own headquarters based in Mumbai. In today’s time, the Margin Commodity of India is the biggest commodity in India in terms of future exchanges.
Established in November 2003, MCX operates under the framework of FMC. However, in 2016 FMC integrated with SEBI and MCX as an exchange falls under the scope of the Securities and Exchange Board of India (SEBI).
Which Commodities are traded in MCX?
There are four types of commodities traded in MCX:

  • Agriculture based commodities like pulses, grains, edible oils
  • Energy commodities like crude oil, coal, and natural gas
  • Base metal commodities like aluminum, steel, copper
  • Precious metal commodities like gold, silver

There are two significant advantages in MCX, and they are:

  • Organised Structure
  • The price and changes of trading volumes are in an organized structure and totally transparent in Margin Commodity of India (MCX). This helps all the traders to make an informed choice.

  • Wide Range of Opportunities
  • MCX provides a wide range of opportunities in the form of monthly contracts of options and derivatives that offers much-needed liquidity and diversification.

There are three major factors that badly affects the MCX and they are:

  • Geopolitical tensions
  • Wars
  • Natural disasters like flood, tsunami, hurricanes

MCX Demat Account is similar to the Demat account of BSE that helps you invest your money in different commodities in the stock market.
From 2003 to 2015, the Demat Account of MCX was regulated by the Forward Market Commission and later on, it integrated with the Securities and Exchange Board of India (SEBI).

MCX trading account is an account that helps you to buy and sell different commodities like agricultural, energy, metal and others on the MCX. However, they can be cash-settled or physically settled.
Recently the regulator of MCX, Securities and Exchange Board of India (SEBI), has made the physical settlement of stock derivatives compulsory.
To open a trading account in MCX, a trader must keep aside some margin money in their account. This margin money acts as a security, especially for the broker, to compensate for any considerable loss.
There are types of margin in MCX trading:

  • Initial Margin
  • M2M Margin
  • Special Margin

Initial Margin

Initial margin means the minimum amount of money a trader has to deposit in its MCX Demat account to start trading.

M2M Margin

THE M2M margin means a Mark-to-market margin in which profit or loss in a trading day is adjusted each day. If a trader has accumulated profit, the money is directly transferred to their trading account by the clearinghouse.
If a trader has suffered a loss, the money is directly transferred from the MCX account to the account of the clearinghouse by their broker.

Special Margin

The special margin is collected by traders to set of excessive speculation and to control the volatility. A trader must note that they will get a margin amount between 5% to 10% of the contract value of the commodity.

There are three significant benefits of an MCX trading account that allows you to:

  • Invest in several different commodities
  • Ensures and delivers seamless transactions
  • Get instant access to all major detail reports that are important for due diligence
  • Gives Better Diversification
  • A trader who has MCX Trading account can invest in a wide range of commodities. This ensures satisfaction and gives better diversification to your investment portfolio.

  • Hedging Helps to Minimize Losses
  • In MCX, the Price of different commodities is fluctuating. Thus several importers and exporters use hedging to minimize their losses. One can hedge his or her supporters to the physical market by taking an opposing stand in commodity futures markets.

  • Fix Price
  • Commodity trading helps to discover a variety of prices for a trader. If you’re the primary producer of a specific product in the market and looking to fix a particular cost of any commodity, then you can take part in commodity price and set your desired Price.

  • Which Commodities are traded in MCX?
  • There are four types of commodities traded in MCX:
    1) Agriculture based commodities like pulses, grains, edible oils
    2) Energy commodities like crude oil, coal, and natural gas
    3) Base metal commodities like aluminium, steel, copper
    4) Precious metal commodities like gold, silver

  • What Is MCX Demat Account?
  • MCX Demat Account is similar to the Demat account of BSE that helps you invest your money in different commodities in the stock market.

  • What is MCX Trading Account?
  • MCX trading account is an account that helps you to buy and sell different commodities like agricultural, energy, metal and others on the MCX. However, they can be cash-settled or physically settled.

  • What are the Benefits of MCX Trading Account?
  • There are three major benefits of MCX trading account that allows you to:
    1) Invest in several different commodities
    2) Ensures and delivers seamless transactions
    3) Get instant access to all major detail reports that are important for due diligence

  • What is MCX?
  • MCX, called Margin Commodity of India Limited, is similar to BSE and NSE, where several essential commodities like gold, silver, and agricultural commodities are traded effectively.

Final Thoughts

Trading in a wide range of commodities can give several significant benefits and profit if a trader has applied the right tactics and strategies through a major platform like Margin Commodity of India (MCX).
Different types of commodities help the investors to get a clear idea about these markets and transactions.