MCX will launch electricity futures contract from July 10, know the daily price limit

MCX Electricity Futures Contract: This new offering aims to meet the growing demand for tools that help manage the risks of fluctuating electricity prices.

MCX Electricity Futures Contract: Multi Commodity Exchange (MCX), India’s top platform for trading commodity derivatives, on Tuesday announced that it will launch electricity futures contracts from July 10. The new offering is aimed at meeting the growing demand for tools that help manage the risks of fluctuating power prices.

Praveena Rai, Managing Director and CEO of MCX, said that the new contract will play a key role in making India’s energy market better, stronger and more structured. She also said that the launch will support the country’s goal of achieving a sustainable and market-driven approach to electricity pricing. The contract has already received approval from the Securities and Exchange Board of India (SEBI) in June.

As per the rules, the daily price limit of the contract will be 6 per cent, which can go up to 9 per cent on any given day. Additionally, the initial margin requirement for traders will be at least 10 per cent or volatility-based margin, whichever is higher. There will also be limits on client positions, which will be capped at 3 lakh MWh or 5 per cent of the market open interest, whichever is higher. Electricity futures contracts will be available in four contracts for the current month and three contracts for subsequent 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 Exchange (IEX) controls more than 90 per cent of the electricity futures market. MCX intends to work with spot prices to provide a competitive alternative. The exchange believes that the move is timely, as the power sector in India is growing rapidly and requires better price stability, especially due to changing demand, fuel costs and market conditions.

Industry experts believe that the new futures contract will help both power producers and investors better manage volatility and plan future generation. The initiative is also seen as a major step towards India’s transition to a more sustainable energy future.

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