MCX, the country’s largest commodity exchange, will launch futures trading in electricity futures from July 10.
To start with, the exchange will have three contracts expiring in August, September and October. The basis price will be per Mwh and the trading unit will be 50 Mwh.
While the maximum trading order has been fixed at 50 times of trading unit, the tick size will be ₹1. Last month MCX received SEBI approval to launch electricity derivatives.
The futures contracts—linked to the price of electricity—will allow power generators, distribution companies, and large consumers to hedge against price volatility and manage risks more effectively.
With renewable energy now accounting for 40 per cent of overall power generation, the electricity derivatives could serve as a bridge between the physical and financial sectors.
Under the current regulatory framework, SEBI will regulate all electricity derivatives that are cash-settled. If the contracts are compulsorily deliverable, then SEBI and Central Electricity Regulatory Commission will share the regulatory oversight.
On June 11, SEBI also allowed NSE and BSE to launch cash settled electricity derivatives.
Starting with the monthly energy contracts, NSE plans to gradually introduce contracts for difference (CFDs) and other long-duration electricity derivatives such as quarterly and annual contracts, subject to regulatory approvals.
The entry of two formidable exchanges will intensify competition in the energy derivatives segment.
Currently, being the early mover Indian Energy Exchange has emerged the largest in this segment.
In the June quarter, IEX traded volume was up 15 per cent year-on-year at 32,382 MU. During the quarter, it traded 52.65 lakh renewable energy certificates recording a 149 per cent year-on-year increase.
Last month alone, IEX traded 32.32 lakh Renewable Energy Certificates, marking a 636 per cent year-on-year increase.
However, IEX may face near-term headwinds from implementation of market coupling, high power price-driven shift in power volumes away from spot market to longer-duration instruments and rising competition.
Introduction of a full-fledged market coupler implies an independent third-party will collate all buy/sell bids and derive at a uniform market price across all exchanges. This potentially negates IEX’s ‘moat’ as other exchanges can eat into its market share over time, said Nuvama Institutional Equities report.
Published on July 4, 2025