MCX and IEX Sign Licensing Agreement to Launch Electricity Derivatives in India

The electricity derivatives will be linked with IEX spot electricity prices on the MCX trading platform

November 2, 2020


The Multi-Commodity Exchange of India (MCX) announced that it has entered into a licensing agreement with the Indian Energy Exchange (IEX) to launch electricity derivatives in the country.

Derivatives refer to financial instruments like bonds, stocks, and commodities that are traded based on the value of their underlying assets, which in this case would be electricity.

“The launch of electricity derivatives shall provide an effective risk management avenue and help the value chain participants to hedge price risks and protect their revenue margins. With this, India shall also join a select group of developed countries that offer electricity derivatives on an exchange platform,” said the press statement.

MCX stated that the electricity derivatives would be linked to spot electricity prices of IEX on the MCX trading platform. The agreement requires mandatory approvals from the central government and concerned regulators, it added.

According to MCX, it is India’s first listed electronic exchange platform that introduces commodity options in the country. Commodities such as energy, metal, and bullion are traded on the platform.

Electricity trading has caught the attention of the markets off late.

In August 2020, the Central Electricity Regulatory Commission approved the introduction of the ‘Green Term-Ahead Market’ (GTAM) contracts on the Indian Energy Exchange, adding that it would provide an avenue for short-term trading of renewable energy.  This market now offers the trade of intraday and day-ahead contracts in both the solar and non-solar segments.GTAM has witnessed an encouraging response since its launch and had registered trade of three million units in the 11 trading days in August.

Mercom then reported that the Appellate Tribunal for Electricity (APTEL) issued an order postponing the trading of renewable energy certificates scheduled for July 29 by four weeks in a hearing for an appeal by the Green Energy Association against the CERC on July 24, 2020. The matter is still pending, and power traders are in limbo.

Harsh Shukla is a staff reporter at Mercom India. Previously with Indian Express, he has covered general interest stories. He holds a Masters Degree in Journalism from Symbiosis Institute of Media and Communication, Pune.

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