In a first, MCX, the largest commodity exchange in the country, on Monday, launched trading in bullion index futures on MCX iCOMDEX Bullion index or the MCXBULLDEX. The index will track the real-time performance of flagship near month MCX Gold (1 Kg) and Silver (30 Kg) futures contracts.

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The weightage of gold in the index is 70.52 percent and that of silver is 29.48 percent. Three futures contracts of the bullion index expiring in September to November are available for trading. The contracts would be settled in cash.

The lot size of the index is 50 lots. It means the profit and loss in Re 1 movement is Rs 50.

“Bullion Index futures offers retail investors an opportunity to invest in the bullion sector as a whole without the need to analyse the gold or the silver market separately...it is convenient as the contract is settled in cash,” said Saurabh Chandra, Chairman, MCX.

“The index is expected to incentivise the institutional participants to create a variety of unique trading and arbitrage strategies by utilising underlined commodity contract variants and the index futures product. It can also be used by institutional investors including fund managers to benchmark the outcome of their investment decisions in the bullion sector. It is an easy to replicate index with minimum tracking errors and passive index-based investment strategies,” Chandra added.

Fund managers can also create ETF products on index and offer them to their clients.

Here are some details of MCX Bullion index contract:

Segment

: FUTIDX

Symbol: MCXBULLDEX

Trading Unit: 50 times index value.

Price quotation: Index points.

Market lot: 50

Tick size: 1

Profit/ loss per one rupee change: 50.

Expiry: Monthly

Settlement: Cash settlement (No delivery).

Index Weightage: Gold (70.52%) and Silver (29.48% ).

Index value: 16000 (Approx).

Contract value: 8,00,000 Approx. (16000*50)

Margin %: 6% Approx. Or based on VaR.

Margin value: 48,000 (Approx.) Or based on VaR.

Contract Start Day: 20th day of contract launch month. If 20th day is a holiday then the following working day.

Last Trading Day: One business day prior to the start of rollover period in the underlying constituent/(s) index. In case, if there are no rollover during any calendar month, the contract will expire on 25th day of the month. If 25th day is a holiday, then preceding working day

Daily Price Limits: The base price limit will be 3%. Whenever the base daily price limit is breached, the relaxation will be allowed upto 6% without any cooling off period in the trade.

In case the daily price limit of 6% is also breached, then after a cooling off period of 15 minutes, the daily price limit will be relaxed upto 9%.

In case price movement in underlying Commodity Index is more than the maximum daily price limit of index futures (currently 9%), the price limit of the index futures may be further relaxed in steps of 3% and informed to the Regulator immediately.

The MCX had conducted mock trading of the index futures of bullion and other metals like gold mini, silver, silver mini, copper, and zinc in July.

“This contract is very useful for the traders as this will provide trading in futures and options and as well as hedging tool to the traders. This will also help to diversify the portfolio and low volatility,” said Anuj Gupta, DVP- Commodities and Currencies Research, Angel Broking Ltd.

MCXBULLDEX opened at 16,400.00 and at 12:50 pm, it was trading at 16,240 down 0.06 percent.

"MCXBULLDEX is expected to trade lower tracking weakness in MCX Gold & MCX Silver. Support for MCXBULLDEX is at 16,220 and below same, it can test 16,140 level. While resistance for the day will be 16,370 and above same can see resistance at 16,460," said Ajay Kedia, Director, Kedia Commodities.

First Published:Aug 24, 2020 1:18 PM IST