Multi Commodity Exchange of India Limited (MCX) Earnings Call Transcript & Summary

Welcome to the call with the investors. I think we have [ ask ] investments, [indiscernible] and [ ytuk ]. Is that correct? Yes. Go ahead and ask the questions. But let me -- as I mentioned in the analyst call, I'm personally very disappointed by not being able to migrate to a new platform. A large disappointment for me because we have galvanized the entire industry and then whatever stakeholders to go. Every day and now, day and night, we spend here in office to make sure that things work, but still there were certain issues which we couldn't address, obviously, for which reason we couldn't go. And I think we should be able to galvanize the same -- bring in as much force as we have brought in and then fix whatever the issues that were there and then propose to go live this time around. Let's see.

Thank you for the time, and we wish you the best in...

I think we should record the names. Your good name, please?

Bhavesh Kanani from ASK Investment.

Please introduce.

[ Mashak Lodya ] from WhiteOak Capital.

[indiscernible] Singh from WhiteOak Capital.

[indiscernible] Ritika Dua from Ocean Dial Asset Management.

So thank you for your attention. We'll actually will take up from what you were mentioning about the transition itself. In the last call, you gave a little bit of additional clarity as to the activity where the transition seems to be facing challenges, which has to do with the end of day activity. Is that the right understanding that the transaction matching and order management system that is in place that is functioning well. It's only the transaction posting part, which happens at end of every day and has to be done before next day trading starts. That is the only portion where we are facing challenges or that is an incomplete understanding?

No. See, we have two models. One is [ T7 ], which talks about the trading, which is the [ Deutsche Borse Indian ] which is customized for us. The other one is the banks, which is the clearing and settlement. The bank has also a component called Risk Management System. These are the broadly speaking. So the T7 part, I think it's by and not stable. And it's the banks, again, it's processing it, but sometimes the maybe component, [ DB2 ] database, maybe crashing, or it requires some fixing or sometimes it would be taking more time because certain processes are delayed -- slow in processing, files are getting late, okay, or some kind of corrections were required to made to the files, et cetera. So that's why the by that time you complete all of them and make sure that the next day system is available, that's why it is taking time. And so obviously, you have to be up and running by 9:00. And usually, what happens is by 3:00 or so in the morning, we give the files the member [ brokers ] for their backup systems to consume. By 6:00 or so system is ready and released to the members, and they will start logging in whosoever wants to log in maybe 7 o'clock or 8 o'clock, whatever it is. So obviously, we have to be there that -- and at times, it didn't happen. So that has weakened our confidence of going live. Also on three, four occasions we had canceled the mock sessions. Sometimes some data migration has taken place wrongly, or sometimes maybe the system has crashed and then to bring it up took time. These kind of things we need to face. That's where it is.

And so has it to do anything with like, let's say, in case of equity, the market closes at 3:30. Typically, we as individual investors get messages of the effect of those transitions from exchanges at 9:00, 10:00 in the evening. But in our case, the trading itself ends at 11:30. And we have a smaller window to do the EOD activities. Is that one of the challenges in terms of time.

So understanding by what you are saying, but if we had a bigger window for next day to start the session from the last trading session till the next day morning opening, probably we could have had luxury of time to fix some of them, in the overnight and then give the system. But that luxury is not there.

Not there.

That's -- yes. That's what is important.

And compared to earlier time or let's say, when we are using 63 Moons, that has both these models in one system. Is it right?

That is monolithic system.

Monolithic system. And now that we have a separate model for clearing and settlement, naturally, that bit of module is interacting with external entities, custodian banks and all. Is the delay cost even partly by delays from external entities who have to be part of this exercise, or it is mostly at our end.

I'm sorry, I didn't get your question.

So like for clearing and settlement, we need to post whatever transactions have happened in members account whatever quantities they have bought amount to be taken. So that settlement bit involves...

It's like this. T7 does the trading and processes it on directly [indiscernible] to the banks. And the bank's processes it and then uploads the files to the members, puts it in an [ SFTP ] folder, member download it. And whenever, whatever member wanted to submit, there is another window to submit it. All that happens. So it's not that there's been a member intervention for which reason it has got delayed for, nothing of that sort.

No, I was meaning the entities, not necessarily the members. Entities, let's say banks or custodian and whoever are involved, external entities as is an MCX. Are there delays from their end?

They just participate in the mock session. And it is for us to give them back to the files and then for them to test it and call back. Whether they have tested it or not, we keep asking randomly some members to please give the inputs, but not all of them were testing. But some were testing different. You have got something to ask?

Yes. So on the similar lines, is this delay more because of the new vendor that we have. Is it delay from their end or...

Their end means?

Like in terms of developing this new platform, are they -- the relief coming from the new vendor that is developing this platform or maybe the existing vendor is not able to -- like the system integration is not happening with the existing system? Or is it -- like where is the delay coming from? There are three parties in here, right? One is the existing vendor that we have.

But existing vendor has nothing to do with this system. Existing vendors, that is a separate some existing system, and they are -- they are supporting and ensure that the things are -- have to happen as per the great terms, whatever it is. But that is -- and whatever is happening in the existing system, there's no impact on the new system.

Like when, let's say, TCS developing this new system? Are there some integrations that need to be deferred or...

Integration between the banks and the T7, that is where the challenges they did face. That is no doubt one of the important reasons for more time taken because the bank sees ease of the TCS system, T7 is the Deutsche Borse. These two put together have not been deployed anywhere. That's what we have said in some previous calls also. So that integration, they have done now.

And the contract that we have with TCS, are there some clauses, let's say, if the delay is beyond certain levels, there is the some penalty or something like that.

Yes, I did clarify that in my one of the calls also. There are clauses all such penalty clauses [indiscernible]. I mean, they are all differently standard projects, and yes, there are clauses.

So we will be working those [ clauses ].

Yes. I mean it is too premature for me to say today because our focus is to make this system go live. And then the Board will take a call on it. Provisions are there. That's all I can confirm to you.

Also the renewal that we have done. In the press release, you mentioned that this is minimum for 2 quarters was asked by the vendor. Is there a chance that before this 2 quarters end, we are able to transition into the new platform.

That's what we should. We should -- that's what -- as I said, I feel disappointed because last time itself, I had said that, I mean we do not want any more extension. We wanted to go live with this. And since that didn't happen, I was very much disappointed. There's no reason why we shouldn't go live this time. That's the way I look at it.

What kind of extension did you ask for? 2 quarters, they said it is around that we'll have to go over.

So as we said -- we ask you for 1 quarter, okay? So we ask for 1 quarter. And then if you want to give any more quarters, that's up to you, but we ask for 1 quarter.

They post 2 quarters minimum in this situation.

Sir, given that there was ambiguity on the transition bid, there were a lot of different talks of speculation. One-off, it was that any IT vendor serving any client. First, the clear-cut requirements of the software has to come from client and only then the tech service provider will work on it and build the software. There's this rumors, I just want to check. The final requirement submission from our end itself got significantly delayed and hence, so far, we have not seen TCS getting penalized for the delay because probably -- I mean, this is a speculation, so I just wanted to put it this way.

As you rightly worded it is a speculation, and I will endorse that it will be a speculation. And -- and we have worked out ever since we have given the contract from day 1. The teams have been working hard. We jointly with the TCS team making presentations, starts with preparing a functional specifications requirements. And the specific exactly the flow, how it happens and all that. So -- there are several of those documents, several, not one or two or 10, or 20. No. There are many. And for phase 1, this is what it is phase 2, phase 3, it was prepared. Why? With an intention that while phase 2, phase 3 is happening for is, they can start working based on the documentation that is given. So that's how we had structured, and it happened. Yes, there are delays, no doubt about it. But not that [ requirements ] have not given. No, that's not the case.

Yes. Sir, if I request you, where you just ended to what [ Haresh ] had asked you earlier. On the question that you know earlier, so you were saying that T7 is operating fine. There are some integration issues with the other software. And then you made a comment that now that the integration has resolved or the integration has happened. So firstly, did I get that correct? And what is the flow after this. Do you have to conduct more and more work to get some understanding that this is happening? Or so what is the way forward from here?

Well, see, more and more -- I mean, mocks have to be conducted, no doubt about it. And fine-tuning is also happening. As we said that EOD, BOD is taking more time, that has been brought under control. But still some more fixes are being given. So that we are sure that every day by 3:00, the brokers get the files at 4:00 at best. And by 6:00, we will get the system up and running for the next rate trading. So that's what is happening at this point in time. And in the mocks, basically, we get, obviously, there are any issues from the member brokers, they will raise it. And then if there are any specific member, obviously, they will be addressed specific to the member. And members will also test the [ fights ] that we have generated. As we said, it's not the first time we are giving the mocks. We have already done about 30, 30-plus mocks in the last 3, 4 months, we have done that. And we did get a lot of feedback, so many issues got ironed out. And this time, mocks, we should have a smooth run [indiscernible].

Sorry, I'm -- just one last on this. So sir, by the way you put it, and obviously, just my apologies for lack of the technical expertise here, it seems that you are actually very confident because if this is from where you started in the first quarter call, the concerns were, to now what you're explaining to us? And then somewhere in the call when you know somebody said that, would we be ready by October, you said we could be ready by September as well. And we are already there in August. So then, sir, why aren't we saying it is September? I mean, what is so crucial in these 2 months is what I just want to understand to maybe I know we can't track these things because these are internal to you, but whatever best we can understand from you is where I just want to maybe end this question.

See, as I said, we want to make sure that all systems are in place and we would like to run internally maybe for some days mock. We are running even now as I'm speaking also, mock is being run. It's just not exposed to the member brokers. We are also using a trade generators so that the volumes are as much as in the daily life of the exchange. So we are testing with full volumes and -- but it's only exposed to only to the internal -- this one, testing teams are doing that. So once that is completed, and then we get the EOD, BOD, clean runs, okay? Then we will expose it to the member brokers. That's -- we will start the -- we will issue a circular to the market saying that from certain [ subsidies ] the mock runs will start.

So in this simulated environment where orders are generated by machine, there, EOD, BOD are not an issue.

No, no, no. They are also issue. That's what -- that is the reason why we are fixing it. If it is addressed here, then it will be addressed for everybody else anyway.

Okay. And this EOD activity running slow. And again, just like with Tika, we are not technical people. So I just want to check whether it is about server capacity which is not able to process so many transactions or the system itself is not able to handle those volumes and is crashing.

No, no. I think EOD processes not just one job step. There are several jobs steps that have to be done. Those job steps also have to happen in sequential manner. So there is a schedule around for it. So you run this file first, and then you arrive at a certain numbers, you run this number, this file, then obligations will be arrived, then you do this, then market statistics data will be updated. So there are various job steps. These steps pass, see whether all results are coming correct or not, and then move to the next step. So that's how the EOD, BOD processes will start. Similarly, a new member, a new [ users ] are uploaded during the trading day which are activated next morning. So in the start of the day, processors are building up the day processes, you need to make sure that all the ones which you have uploaded, which have been [ pan ] verified another thing should be available for trading next day morning. So there is something and other files will be there, which says in the records of the exchange for that day, these are the UCCs, which are eligible for trading. So if the incrementally 1,000 are uploaded out of 1,000 only 700 are qualified because pan verification, they failed and whatever it is from the sites then 700 should be there. So this is what the consistency verifications, that process is taking. We have put a lot of [indiscernible] in that system so that the -- the systems don't go wrong. So for all this, as we go along once we attain a greater degree of confidence, obviously, the first time system is being implemented. So it is important that we implement so many steps. Then the EOD, BOD period will come down as we go along.

Okay well, we wish the best, but let's say, we are in October or let's say, we are in November, and we have still not rolled out this system. January contracts, SEBI has not allowed us to come up with Jan contracts. I as a trader when I want to, let's say, go for next month's contract, I want to buy or sell. If the system is not ready, if the contract is not available, how do you see that scenario panning out? Do you see people moving to other exchanges with the volume since Jan contract is not available?

I think you're essentially asking that whether we will allow such a situation to crop up. Okay.

Unfortunately, if that is the case...

But that's what I'm saying it. I think that is the worst-case scenario that you are looking at it -- but I don't -- for me, it is a hypothetical question, and I would not like to -- I mean, we are all committed to make it happen. That's why you said that somebody asked the question that whether it will happen in October, I said we should do it prior to end of September. So that is what our target is. So we are -- that's where we are. That's what it is.

Just want to ask it's around [indiscernible].

Yes, yes. Don't worry.

Yes. sir, just one last and my apologies to again press on that question is. So what I understand that, sir, obviously, because it's -- you're running such a big experience, so you obviously need to be very confident when you really roll it out. So -- and when I hear you out on the last bit on that you're trying to increase more and more volumes trying to do more and more processes. And then you mentioned one example where 1,000 files are updated 700. And so it's coming out to be that you want a particular accuracy level. So am I getting it right and where are we today? Is that kind of a question is right to ask you. And so -- and when -- getting back to the previous discussion, where in you were saying that T7 is running fine but the issue was in the bank's bid. Whether MCX fall in this, what is the role of MCX here when it comes to sending member files, et cetera. What is our back-end role in this whole integration process?

Well, as far as MCX is concerned, we have been monitoring the systems, okay, that the systems should not go down. The infrastructure uptime is our responsibility, application uptime is the TCS, which is looking into it. But monitoring is what we are doing it. And in terms of the accuracy and other thing is what we are verifying it, even INR 1 cannot go wrong is obviously that there's a financial integrated part of it, we can't afford any kind of such kind of deviations. Similarly, any kind, no loss of transactions also in transit. At times, the data packets may be lost. So we have to ensure that nothing is lost. And whatever the members pump in, it reaches the t7, it reaches the banks and it reaches the data warehouse. It reaches the surveillance system. Every data packet is to reach trades and orders with all its characteristics, whatever the type of order and other things. So yes, it is -- jointly, we are working on this madam. And as I said, the application ensuring the uptime and making sure that all these competitions come right is the responsibility of the TCS. We verify it, we ensure that adequate testing has be done and monitor all the services are running.

Sir, recently there was an RFQ floated. If I'm not wrong, regarding the span calculation application. So like is it a separate application, which TCS cannot do? Or like is in the part of domain telesystem that you have?

Well, when we had given the request for them, then obviously, the risk management system is part of it, and it continues to be part of it. And we are going ahead with the TCS module only. It's not that we are doing that. But as the -- what you call the latency numbers, okay? The latency numbers are very important for us. The lower the latency the better it is from the risk management point of view. It is somewhere in some microseconds up there, but some other exchanges are having even still lower microseconds kind of response. No, not micro, I'm sorry, milliseconds. I'm sorry, milliseconds. Yes, milliseconds only. And so they wanted to -- as a developmental activity, they have done this. So maybe 6 months down the line, then we implement it, okay? The primary purpose of it is once the trade is done, it will go to our risk management system. It margins it and then sends the trade back to banks that's it nothing else. And then it informs the member out of your INR 10 crores, INR 1 crore, whatever is the collateral, so much is deducted and then this is what the outstanding bullet is your margin. So how fast you do that margining is what is the risk management is all about. So that's where they wanted to improve that response time. It's more a developmental activity.

Compared to other exchanges, I don't know how you'll express this, but how many times is our latency [indiscernible] compared to, let's say, what other exchanges a reporting?

See, we don't have the number directly from them, but some vendors whom we spoke to, they have said so and so has got because they work with them. So and so has got that number kind of thing. So we wanted to achieve that. I mean, it's not -- okay, today, even today, we have the margins, okay? you will not do anything if it is -- there is what you call alert mechanism 70%, 80%, 90% and after 90% they go into the risk reduction mode. And then after 100%, they will go into the square off mode. So all those mechanisms are there, okay? It is just that whether that risk reduction mode or a square off mode will trigger a 1 o'clock or at 12:55 is what the difference it will make, nothing this one. For me, incrementally, it's good to have. But maybe internationally, I don't think it -- I mean, so much of risk management online is being done elsewhere, to the best of my knowledge. Good to have, maybe they will do it batch mode but not online, every transaction you send it to get back.

Taking a step back from the technical bit. One question has been bugging me and since you have background of other exchanges as well. A lot of data tools that very few option traders tend to make money, very small fraction of total base. Whether it is equity commodities. But still, people are glued to this, if you look at the volumes we are generating. What keeps them going I'm baffled, honestly. So if you can help us understand this bit that from where I'm looking at it, if less than 1% of them are able to make positive returns practically for 99 of them, it is like [Foreign Language]. Every day in and out monthly basis [Foreign Language] consistently. At some point, one would assume [Foreign Language].

No, the results are substantially about the equity markets, what I mean is that the research is flowing from that. So I think these macro perspectives come from research only. Probably individually, we keep thinking that everybody is making money. That's why they are still blowing to the screens. But obviously, it's a 0 sum came, if one is gaining the other one loses that's the way it is. Not that everybody can make money. And so why they are still doing it. Some of them -- the difference between the equity exchanges and then commodities is there is some bit of hedging that is taking place on the exchange's platform, okay? The risk management they are doing it. So they are not interested. They neither make money nor they lose it. Because the contract position is what they take it if they take the physical book as well as the financial book for them, it is a [indiscernible] situation. And that is the reason why they continue to participate. Maybe some speculators are needed, definitely in every market who provide liquidity for these hedges. If you only see only hedges should come to the market, then there won't be any matter of preferences all the time. Today, you want to hedge it, but there may be no opposite side to hedges. So your requirements are not met. So these are the ones who are filling that gap. And I'm sure there must be some way to make money for which reason they are sticking on to it. Maybe there is also turning that people keep thinking that they will whosever has done it. He may be moving out, the new guy is coming thinking that it is an [ El dorado ]. So that's how it is.

Like one reason why equity options are like the volumes are the way they are currently. It may be because the retail traders know about these companies, like, as they know what, let's say, reliance the other, like all the companies do. So there is quite a bit of education that they currently have. So why don't we go all out on this to educating them about this options contract that you also have, may be introduce various new contracts on weekly or all those expiring smaller contracts. And there are these platforms like all the brokers do educate the customers about options trading and all. Why don't we push them to educate the customers about commodity options as well, just like they do for equity. Then that will create a lot of volume? And once the volumes come into options market, of course, there will be some institutional desks, which will be hedging it in the futures market is on the opposite side that will increase the volume on futures as well. Why -- is there any [indiscernible] behind that?

Well, investor education has been continuously taking place. There's no doubt about it. Almost all may be 1,000 or 1,500 are investor education programs we have conducted across the country with various stakeholders. It's not just put up a shop and then say that some on here is investor education, no. The specified education institutions we go and we also go with the industry associations. So industry bodies, some of the like a lead association or aluminum. So those stakeholders also will get educated as to what happened. Our MSME associations we are having the programs. Now while this is all fine, but there is an inherent I would say, barrier, entry barrier into the commodities vis-a-vis the equities. That is the contract size itself is bigger for people to get in as easily as into equities. Okay. Now for example, you want to trade in cotton. Now the cotton is 100 bales. Now 100 bales is almost all how much INR 30 lakhs on which you pay 10% of margin, which is about INR 3 lakh. Okay. Now is the 3 lakhs of investment is there on the other side? No. That is precisely the reason why our number of investors, UCCs is all made to INR 6 lakh, UCCs that have traded during the entire year as against UCCs, how much is filed?

1 crore...

No. No, ours is less. Ours is just actively traded are..

2.7 plus 2.7 around that. Futures and options right?

No. Not like that. Futures and options is 621,000 UCCs. Just 621,000 UCCs that's all the entire year. So as against the crores which trade in equity. So because there is a barrier to enter in the form of higher contract size, greater margin requirements, et cetera.

But then all these smaller value contracts, they are still failing to attract volume, if that was indeed the impediment?

So the smaller contract side still not as small as the equity so...

Let's say, in bullion and energy, what is the minimum one would have to come with. In terms of value...

100 grams is the mini contract, gold mini okay? 100 grams is INR 5 lakhs or INR 6 lakhs contract size Okay? And INR 6 lakhs is about almost 12%, 10% is INR 60,000.

Can you go lower than that, less than 100 grams.

but then [indiscernible]. Yes madam.

No, no, sir I was saying gold petal is where, I was saying, yes.

Options are not there in that.

Yes, but then options are not there in that.

What stops us from launching there?

Let these contracts deepen because it gets fragmented also, the more you keep slicing the same product into so many things, the liquidity will get fragmented. You should also have some kind of a bandwidth we can be, so we should be playing it. Yes, madam, you're saying something?

Question on the premium to notional turnover if we are done with this one.

Yes.

So sir, obviously, you already shared with us that how it is depending on how the options are -- whether they are like obviously in the money, out of the money chooser and then that's one of the factors. But if I just historically see, I mean as per the history we have available, the premium to notional turnover for bullion has always been sub-1. Whereas, obviously, the one the same for energy has been varying from maybe a high of 2.9 to now 2.1. What best explains the differential? Is it largely volatility? Is it the size or so that's what question I have. And is there a way we can -- because what has happened for this particular quarter, the share of your bullion improves from 5% to some 11% on a quarter-on-quarter basis in terms of the share. And that probably is also a reason that your premium promotional turnover came off. So I just want to understand that then is it a good thing to actually have an increasing share of bullion in the auctions? And also, is there a way to even maybe increase the premium to notional turnover and on more out of bullions?

See, we -- I mean we have been explaining all along that auction -- revenue from auctions will not go below what we call the INR 40 that we are charging with and there were only 2 slabs. But what is important is, it is the premium to the turnover. Usually, the premiums happen to be 2% of the turnover auction premium. If it goes down, Yes, it will be -- it may be about 1.5 is what we have seen it. I can't be more or less than that is what we have noticed. Is that correct?

Yes. When you begin, it was 1.5 million then 2.2 and then closer to 2 now.

It will remained in that...

I meant was more not the blended number but the breakup which you gave in your PPT of the notional and the premium number for the various segments. So when I try to calculate exactly what is the premium to notional turnover for bullion, it comes less than 1. So maybe I can check that. Blended I know it's available 1.5 to 2 and everything, but maybe I saw maybe bullion was less than 1. So I will check my number if its wrong.

This relation has got more to do with volatility and in the money and out of the money, then which commodity is the underlying. Like what I'm saying is several factors impact this premium to not certain. One could be volatility other is like what participants are looking whether they are looking for in the money, our of the money kind of contracts. Third is even if the markets are growing bigger and bigger, like that means certain amount of maturities coming in. Automatically, people find even out of the money also more liquid. That means they find force coming there. Start participating there also. As the market go bigger and bigger, certain kind deeper, deeper and other things. You can find certain amount of like people. Like now today, it is like you are looking at only near the money. Secondly, do you like I suppose even a far month started building up the liquidity. Automatically, the premium to notional turnover again can go for a change. So it's all depends on several factors, but I feel that as the premium turnover result is growing, you can look at on a positive manner because it is how you can look at it. That means even that the deep out of the money is getting relatively liquid enough that a certain amount of liquidity is building up in these contracts. That is how you have to look at it.

So is it safe to go with middle number or something like...

That is nothing but [indiscernible].

It's all about like, for example, if you take currency derivatives, the number is different. Tech equity market. Again, it is different, index derivatives, equity pay. Again, it is different. Each market has a different number to it. So we cannot come out with any fixed number to it. But like I said, there are different factors that can have a bearing on this percentage.

So if we increase the number of out-of-money contracts that can...

So other things keep in constant. If you look are the only out of the money contracts are building the liquidity and other things. Naturally, the percentage should come down because the premium amount that you get it from the out-of-the-money contracts is going to be lesser compared to the [indiscernible] contract.

Can you have a differential number of content, say, one at the money, maybe 10 money and...

Strike prices are based on that only.

Strikes are issued, but it all depends upon what people are looking at it, whether I would like to trade in an in-the-money contract generally as the contractors coming to a nearer to the [indiscernible] . Automatically, people equally trade in the money because out of the -- chances of out of the money coming into in the money is relatively difficult.

That is how -- there are various factors that is how we have to look at it. And I think our markets are still maturing. I can say that just 2, 3 years, that is when actually our market -- in our market options started picking up. I think we should wait and watch how the things are...

In terms of sites, do you -- let's say, the commodity is at 100. how many strikes on each side would you start the month with.

We have...

Depending upon like crude, I think we have maybe a bit more 15, [indiscernible] and also number may not be right, but we keep we are giving for different commodity, different one depending up on the market interest.

Volatility also, we look at it, even they how much [indiscernible] so accordingly we provide from a greater number of strikes.

So we haven't had a situation where to, I mean, if, let's say, you have a band of 120 and 80 in terms of strike price for a commodity trading at 100 and let's say prise move to 120. See irrespective of the price movement, you have a contract to trading. That means even if it is a deep in the money or out of -- at the money also people can continue to trade that one. But the only thing is you cannot be able to introduce a [indiscernible].

That's what I was inquiring.

You won't be able to do. At the same time, if I come out with too many strikes, then automatically liquidity also will get back. And there is also a risk at times illiquid option contracts are used for some transactions which are not strictly for the purpose of trading on the exchange. So that becomes a surveillance headache for us. So we have to be careful about where they trade, what that trade.

Sir, on oil imports, which are now happening in INR terms, does it have any spin-off benefits for us, let's say, corporates who were earlier would probably be hedging their oil exposure, energy exposure actionably out of India and other exchanges. But now since those transactions are happening in INR, is there a possibility of us getting more volumes because of that particular development.

Well, from the consumer point of view, we have been getting good amount of -- we are seeing traction of it just participating consumer side. But in terms of supplier side, refineries, they don't come on to the exchange, okay? So yes, definitely, consumers are participating. But more important is that I must say is that ours WTI. It all depends on how much is the WTI imported into the country. And how much is the, what we call price that the government determines within the domestic market based on the component of the WTI, at what price they've got it, et cetera, et cetera. So in that sense, it's not a free market. It's a regulatory market. And I think these prices are definitely a benchmark and these prices are definitely a representative to price for somebody to look at how the other products are moving in the market and then hedge some ratio of it. They will always -- in terms of correlation, yes high correlation is there. But in terms of our oil pricing, I don't think the domestic oils are liberally priced in that sense. All the controlled pricing is in place. And we cannot compare a free market price with the controlled price whether they are moving together or in tandem or there's a high correlation or not. There will be definitely relation will be there because nobody can subsidize forever. The prices are moving up or going down, you need to adjust to those prices as well.

And you made the statement so that consumers are using the derivatives to hedge.

Some of them, yes.

So how do we -- at aggregate level, do we get a sense that out of total participation with confidence that these volumes -- you do disclose a table. But what is the logic behind that? Because ...

That the disclosures are based on the declarations made by the investors at the time of trading whatever that is there. Whether they would like to call themselves as hedger or there are some value chain participants on, how that they would like to be defined. Accordingly, we'll aggregate it and then verify. Now so there are certain, what should I say, some the market-related issues are there in terms of their participation. And I think we need to address it. And for example, we had approached in the past on private sector refiner. They said that, look, I do not want to participate and then take daily mark-to-market loss, profit and all that. I don't want to deal with it or you go ask, call me and give you margin all that. I don't mind giving you a bank guarantee. It means to may be exchange or to the member broker, arrange credit lines and let them deal with it. And at the end of the month, I know that I have this many lakhs of barrels inventory on a daily basis, I will hedge it -- part of it I will hedge it, but you please iron out these participation related issues. But we couldn't solve them that there are much bigger issues in the regulatory jurisdiction. So it's a challenge for us.

Anyways, there could be more member brokers kind of relative to take care of this kind of needs of customer?

No. But members also can't fund no, as per the regulatory, the members can't fund. No, they don't mind giving you bank guarantee, but arrange for the funds on a day-to-day basis, if there's a M2M loss, let the bank give it against by whatever guarantees that I give it. So it is a third party will come in. And the bank will say that I need a tripartite attachment with the broker. If there's a default, then I need to seize the account and then adjust and all that. But tripartite agreement relationships may not be permitted.

From the OpEx, if I may check on -- two things, actually. So when we first heard from you on the PCS contract, after. So there was a maintenance, which was to maybe happen once you transition. Could you just reiterate where does that stand today? And we were to, I think, disclose the more about like the cost of the software and everything. May be I think we have said that we would do it maybe if I'm wrong, not wrong, maybe April or May. So when are we looking to maybe you must share more details around that? And just related to it, I understand, I heard the call and why the depreciation was lower this quarter because of it was higher last quarter for some aggressive depreciation that you did accelerated, sorry. But how does depreciation maybe look like going maybe -- from here, maybe. That's the 3-part question. One is what is the maintenance bit on TCS is the same, which you have first mentioned? Second, when are we looking to disclose the cost on the software and thirdly, on the depreciation.

The first 2, I will answer, yes, it remains the same. There is no change in that. The second part of it is the cost of software and other things. I don't think we can disclose it because it's a commercial transaction. Imagine if I disclose it and then they want to sell the software elsewhere, then it becomes a benchmark for them and then it's not proper. But in our accounts, we will keep depreciating it whatever is the hardware. Once we go live, obviously, everything will move from capital work in progress to the book in the depreciation assets? And everything -- I mean you may not get exact number, but then definitely, you will have the aggregate number. And on the...

On the depreciation ma'am, once we go live, so I mean it would be as per the useful life of the asset to the hardware part would have a useful life as well as intangibles. That is the platform would also have a useful life. And according as per Indian INDS will depreciated as per the useful life, which would range from 6 to 8 years.

So far, sir, if I see this FY '23 cash flow statement, I think the number that we have disclosed in terms of like purchase. So that would be the hardware bit is what you're referring to? So that's a good way to understand?

Yes. Mainly, I mean, most of the hardware has been purchased and is there in the books and a small part of the TSC.

From a long-term perspective, sir, how would you size the opportunity of a commodity exchange in the sense that user base is one angle relevance for corporate clients is another, speculators is another UCC, you mentioned barely a little about 6 lakhs, whereas the total base is far higher for us active traders are less. So if you were to look at a 5-year kind of scenario, how would you pin the scenario in terms of the volumes, revenues?

Well, I would not like to what you call give any projections or any kind of estimates or how it looks like. But there is a huge scope for the growth of this market, no doubt about, okay? Now one is that -- I mean, we just suppose -- with the international markets, be that China or be that LME for metals and [indiscernible] and CME, some of the products, they are far ahead of us, no doubt about it, okay? Now we have an ambition to grow. But there are certain constraints that have to be overcome. And we are working on it. As we said, the important thing is on GST is one issue. And because the members are -- the whomsoever is trading on the exchange will end up taking deliveries, they have to have multiple registrations across all states where we have warehouses, et cetera, that will be a challenge, okay. Now today, FDAs are permitted. They have just started trading, and it's a very small percentage, but they have to grow, and they should be allowed to -- they are allowed to trade in other commodities. Then again, GST challenges will come. So we need to address this major, what we call, a road block and we are not seeking any concessions. No, we don't want any concession in terms of reduction of GST rate or anything facilitate in terms of cleanup of process in this process of navigating through this is what we are looking for. And so this is one major thing that we want. The second part of it is, will it be as big as equities? My answer maybe no, in terms of number of participants, okay? As I said, the contract is going to be continue to be high. And -- but has the Indian industry has fully hedged? My answer is miniscule is hedged and mini -- a lot have not hedged. Still, they preferred to speculate in the commodity markets, in a sense, not in the organized market, but otherwise on commodity prices, they are speculating, and they are not focusing on the core business or core competence. So that is something which we have to be mindful of it. If they also start hedging, there's nothing like it. And yes, we are focusing more on MSMEs because our liquidity provides support definitely for their participation because all the time, it is [indiscernible] situation for me, when we go and approach big large corporate, they say, your volumes are not enough to support my requirement and other things. Of course, we plead with them at least 1%, 2%, 10% of your business can be diverted and then are done on the exchange platform. They say yes, but then nothing happened. But MSMEs are showing interest. I'm sure we should be able to -- with a greater penetration and then handholding, we should be able to bring in. So that's a road way forward for us. And introduction of a more number of commodities is another way that we need to progress and more products, which are required for being capped into various industries or to be in.

Pardon my ignorance, but if you can help me understand the GST impediment, how is that coming in a way?

Look, let's us see that kind of participant that we have on the exchange platform. Some of them are, as I said, hedges. There are some of them who are financial players. What is the financial player does it? He takes delivery in this month? Next month, he delivers is not interesting matter. We will keep it in the same warehouse. But that financial player has taken a delivery construct to deliver. So he has to register with the government and pay GST and get that GST back when he sells that matter. Now you happened to be a Bombay, you are a financial player only registered in Bombay, but my warehouse is in Delhi. And you may get delivery in Delhi. So you have to necessarily register in Delhi also because you may get likely to get delivery in Delhi also. So these kind of issues are the ones which are bothering us. And our PMS, for example, now PMS, if the rule says that every investor should be having holding that asset in. But investors don't have GST registrations to hold those assets. And they are not interested, obviously. They are interested in the return of near month and spread benefit only, they are interested, not in taking delivery of the contract. And then that's the way it is.

So this matter is already on table with them.

It's been flagged up with the regulators in the government. They are looking into it particularly. And I don't think -- but it's taking time, obviously, these are required long discussions and deliberations and consent of various stakeholders I think Mr. [indiscernible] wants to ask some questions.

But just last one. You said that large corporates always complain about lack of volumes. So they are hedging, but they are doing it in intentional exchanges.

Some of them definitely doing in international exchanges or OTC platforms. But yes, they do cite as exchange trading. I mean, it's not sufficient. The liquidity is not sufficient is what they are... Yes madam, anything? Otherwise, we are done?

No sir. I am good. Thank you so much.

What about you? Good.