MCX to Start Electricity Futures Trading from July 10, 2025
Electricity futures contracts will be available throughout the year
July 9, 2025
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The Multi Commodity Exchange of India (MCX), a commodity derivatives and options exchange, will launch electricity futures contracts from July 10, 2025, enabling power producers, distributors, and large power consumers to manage risks associated with price volatility.
The exchange had received approval from the Securities and Exchange Board of India (SEBI) in June to launch electricity derivatives.
Electricity futures are financial instruments that derive their value from electricity prices and are primarily used for hedging, speculation, or arbitrage.
MCX stated that the electricity futures contracts aim to meet the growing demand for structured electricity price risk management instruments.
India’s power sector has until now relied on long-term power purchase agreements to mitigate price volatility. These contracts offer price stability but lack adaptability, as they do not reflect changing supply and demand conditions. The short-term power market, facilitated by power exchanges, has become increasingly unpredictable, posing risks for both generators and consumers.
Electricity future contracts are seen as a potential solution to these challenges.
These contracts will be available throughout the year. Its trading will be initially opened for the current and the following three months. The trades will occur in units of 50 MWh, with the smallest change in price (tick size) of ₹1 (~$0.012)/MWh.
The contracts will be settled in cash, with the amount based on the volume-weighted average of the unconstrained market-clearing price at the Indian Energy Exchange’s Day-ahead market. This will cover all days of the expiry month.
MCX stated that the contract will adhere to SEBI’s daily price limits for market stability. Its initial price slab will be 6% and can be extended to 9%. The contract will have a minimum 10% initial margin requirement or a volatility’ value at risk’ margin, whichever is higher. The client-level position limits will be capped at 300,000 MWh or 5% of the market-wide open interest, whichever is greater.
