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

Okay. Let me welcome you all from Sundaram Mutual Fund, Invesco Mutual Fund, Motilal Oswal Asset Management and 360 ONE Asset and Max Life Insurance. Anybody else? Yes, that's done. Kotak Equities, of course, who has organized this meeting. Thank you. Thanks to all of you for reposing faith in the company. I think now it's behind us. We need to focus more on the growth of the company and it's the new products, new set of investors or, I mean, new types of contracts, is something that we are looking at it. I'll open the discussion. I mean you can raise any question that I will answer. Please go ahead. Any one of you, start from there.

Sir, if I may. Sir, on the new products, like you said, if you can give some layerings where we are with each product -- how long will it take for us to launch the product? What is the market size of...

Okay. See, one is that there's a new set of products, the products which are existing and then deepening those products. These are 2 types we are looking at it. The new set of products, yes, steel rebars, we already got an approval and because of this transition, we kept it on hold. So probably the permission may be about to expire or whatever it is, but it gets renewed. That it's only a matter of time. And so we have also written to the regulators, expressing them that we will now go ahead and launch it. This steel rebars is why we have chosen. There is a steel ingots also earlier you had, maybe it is in the other exchanges. And there are -- if you look at the steel industry, there are so many value chain products. But we have chosen only steel rebars, because there is a wider participation. The more you go up the value chain, there may be very few and few participants, maybe liquidity is difficult to build that kind of products. And as you go downstream, probably more and more participants will be there. That's one approach that we have had for this. So keeping that in view, the steel rebars is what we've chosen. And again, steel rebars what is that we are choosing is the one which is being used for the construction industry, be that infrastructure or other buildings, big builders they will chose it. Second -- this is one part of it. Second, there are also many small- and medium-scale industries are there. So from the supply side also, there will be a good number of players, just not SAIL or maybe the SAIL Group of Companies or some Jindal Steel, not only those companies, there are many other medium and small-scale industries who produce this, subject to the compliance with the ISO standard. The rebar is supposed to be compliant with the ISO standard, which is -- I mean, I don't exactly know the number, but then ISO standard. Why we chose this, because when we want admit them we should be sure of the quality that they are manufacturing and the kind of material, because we are giving a platform, we are assuring the buyer that this is the quality it gets generated. So we propose to go with, what you call, the military engineering or railways. They have an empaneled list of producers from whom we only -- they buy it. So that to that extent, our credibility of the platform will increase. Gradually, we will start the empanelment process as we did in the case of led. So we want to support these small-scale industries as small and medium, but at the same time, we need to have a phased approach. That is the reason why we have chosen this and this is how we will be penetrating into the market. Second most important or rather third most important, the spot markets are very -- I mean, I would say opaque and they are not organized. Maybe I would say they are organizing a different sense of the term that they don't permit any new entrants to come in and maybe break that monopoly or lobbying that is happening, et cetera, et cetera. I remember when some other exchange launched this steel rebar, not rebar -- the steel, what you call -- yes, I'm sorry, rebar, no, ingots contract. And there is a resistance and some of these local associations written to the regulator and the other thing complaining that there's no price discovery, whatnot, all kinds of allegations. For me, as an exchange, probably we may be playing a spoilsport, where we are destroying monopolies or we are restabilizing, what we call, people who control the prices. Why I'm saying this is it happened in other metals where people want to charge brand premium, because they are so and so. Why brand premium has become important, because everybody don't trust whoever is manufacturing. Because of this brand, because of that name, reputation, they're buying. By doing it on the empanelment on the exchange platform, if -- even if he is a small vendor, if he is able to deliver the quality of the product that we are guaranteeing it, then he should command the same price as anybody bigger ones of commanding it. That is the purpose with which this entire exercise we are doing it. So my personal view is it's a great growth potential for the steel rebar contract. In addition to that, we're looking at again elective futures contract, although it is tantalizing in the sense. We get every day, we should get this quarter, we should get this in this year, but it's not happening. And hopefully, this time we expect it to happen. Let us see, because as the climate -- I mean, climate change is very uncertain, and it's happening rapidly, I'm sure demand for more and more electricity will come.

But we already have an IEX...

IEX is for a spot, not for futures. So you can't lock your price on IEX. And that is day ahead market mostly, [ month ] ahead, 15 days or something, nothing more.

So you will be doing 1-month, 2-month, 3-month contract?

That's right. That's right.

Why was it getting delayed because of your tech transition or something else?

No. There are other exchanges also may have applied it, but as such a decision has to be taken jointly by SEBI and CERC and that has not come as yet and nothing else. So this is another area of new products that we are looking at it.

Sorry to interrupt, but on the steel bar side, can we be as largest...

See, I can't give any numbers and other things. But the point is we are making an effort. Our intention, our effort will be to sensitize the ecosystem, build the ecosystem so that they will take an opportunity to trade on the exchange platform. Volatility has to come in the prices, then only the things will start moving -- picking up. And even if I keep everything ready, but if there is no volatility or if there are some, what you call, long-term contracts kind of things, so things may not go. Like in electricity, some of them are PPE, but still agreement, long-term agreement. But how much is the long-term agreement? Can they also notwithstanding the long-term agreement still they can hedge their costs, because that long-term agreements are also backed to some pricing. So that is not hedged, that pricing. They can still hedge on the exchange platform and then secure their, this one, interest. So this is...

But on electricity, typically, if you see a 3-month, 6-month, that market is bilateral for you, if you see today. We have PTC India, who have a lot of those bilateral contracts for the DISCOM. And essentially, the demand is very short-term oriented. And your vagaries of the climate also make the market short term, which is why IEX is very, very active in today, tomorrow and 11-day contracts. Are you -- so the visibility on how much business that you can get in 1-month, 2-month, 3-month is something it is very uncertain there. So while you may launch the contract, but I'm not sure how much business momentum we will be able to get over there. That practically difficulties of operating as a market simple...

See, we are not -- it's not going to be a delivery-based contract. It's a cash-settled contract. Now -- if you look at the -- how the prices have moved over the months, then somebody who has -- even if we -- they have, what you call, an agreement with somebody, but that agreement is also linked to the spot prices or maybe 6 months spot prices or something of the kind. And we have seen that some of them are linked with the coal prices, some of them are linked with the -- what you call, I'm not able to recall that term. Now what I want to tell you is there are many private parties who want to sell their coal -- I mean, the power also on the exchange. They are also not able to sell it. So keeping these things in view, my personal view is it should work, it should work.

Sir, on your call you talked about the existing products which you have. There are issues in terms of margin being more than for the coal you take, offsetting contracts, then also the margin is full. When you have smaller basically duration contracts, which are not there. You talked about in your call that we will talk about that also. We basically would try to talk with the regulator about that also in terms of after the transition. So what is the status over there? Because that's -- suppose you take offsetting contract, 80% margin is there. So is there a levy over there or something of that sort on the existing contracts, I'm talking about crude oil or gold or natural gas whatever?

Okay. Currently, in crude oil, about 40-plus percentage is the margin. You have it on natural gas about 30% plus. Internationally, it's much less, less than 10% or 10% or so. Now the problem is, if we reduce the margin to increase this one, the stress test results will show that minimum required capital, which is called SGF, goes up. So that deficit in that SGF has to be funded by me, CCL and MCX. Now that means we have to dip into our reserves and put that money.

I'm not talking about that actually. I'm talking about suppose...

SOM, you are talking about. That is a Short Option...

Yes, I take 2 opposite side contracts on the same side, then also the margin is full...

No, that is with regard to the SOM. That is in the options contract, it is happening. They are asking for that part of it. So we have already represented to SEBI. In equities, given, I think, 25% is the margin they charge. Whereas in the case of -- here, 75% is charged. That is the...

Here we are charging full, I suppose.

75% is what I understand, not full. How much? We want to bring it on par with the equities. Appreciate one point. The approach that SEBI is taking here, you don't pick up on and then choose what is less, what you call -- I mean, less premium in equities and then say you implement here. There is another margin. There is another measure, which is about 6 as against 3 here. What was that? The JET score or some other score, I don't exactly remember that. It is more there and less here. Then let us make that equal also. Then is that okay with you? Then our people say, no, it's not. But we represented to them. If you go by the risk that is brought by the members to the exchange or the product is bringing it to the exchange. These -- you're talking about the SOM, but other than that, we have many other suggestions which you have given. For example, for calculating the stress test results, you take a 10-year window in equities, whereas in commodities, we take 15 years. That means, I mean, the high and low prices are also impacting that. So that we wanted it to be less. And the other part of it is members don't contribute anything here. The SEBI regulation say, you may collect 25% more also from members, who are bringing risk to the exchange. Currently, we are not doing it because SEBI said, you may. That means there will be a regulatory arbitrage, we take it and others don't take it, we will have a problem. If they make it mandatory, every member has to contribute, I know 25% of the SGF requirement. Now whosoever has got a higher open interest on the exchange, they will bring it more and they will take it back also when it is reduced. So that is not dispensation which we are asking, definitely not happening. So that is another one. So -- but this SOM alone is not the reason for doing it. My view is if you have a short tenure options contract or serial contract, then it will also address -- I mean volume will increase.

Is that short option also is -- short tenure also is in regulatory purview, right?

It is the regulators have to approve it. When I say weekly or fortnightly, it is not a -- contract itself is for a week. It will be for a month. It will be serial. That is 5th of the previous month to 5th of this month and 15th of previous month to -- like that. But if you have 4 contracts overlapping each other, then every contract will expire once in a week, then you will have a lot of sense.

It's basically more number of contracts actually that also is not approved, right?

No, no. But now we have to -- now we will approve, we'll approach them.

But this is slightly innovative, what you're trying to do, having more number of expiry days by not having weekly, but monthly.

Serial contracts are there in other markets.

No, in India.

In India, we don't have that, yes.

So sir, have you consulted the regulator like -- and do you think it is possible?

No, we have already discussed internally and with the product advisory companies also. This is something which they have been recommending, we must do this. I'm sure it will help us.

One of question was on this gold. So now crude, we have a playbook, where the options have done well and perhaps the reason has been that the margin went up in the future, so it's been a blessing in disguise. It helped your options and options is where the large part of the liquidity is there. And the other advantage that you have is cash settled in crude. When it comes to gold, do you think can you replicate this playbook there? Is there a possibility for you to increase margin in futures or it's a set rule -- increased margin. So I'm just trying to understand the playbook is...

You were saying to push the people to go to the options because it is more. I don't think it will happen that way. The play -- we can't play the same conversion ruling here. The reason being is the contract of gold, 1 kg contract is costing you about INR 60 lakhs. On INR 60 lakhs, the bimonthly contract, the premium on options will be wide.

You also have mini, you're launching petal also...

No, we have it. But then on that for us to launch the option contract, you need underlying future turnover to be certain limit -- I mean, certain level, then all you can launch options. So we will be launching -- I mean we will be applying for this. That's what I said, deepening in the existing product line also.

You don't have options on Gold Mini?

We don't have, no? We have options...

Options on Gold Mini.

Mini is 100 grams.

Yes. So there also -- and now we are launching petal also.

No, no, that is 10 grams is what we propose. So that will be further lower. So the market size can be kind of reduced.

Option on Gold Mini, I'm not aware, is it there?

I'm not sure what -- I have -- by the way, you can download our app is their MCX app, mobile app, where you will get...

This is a Gold Mini product...

Future is there, but he's is asking about option.

So sir, what you are saying is that the Gold Mini futures volume is less, and that's why you're not...

You need INR 500 crores or INR 1,000 crores, something of that kind in the room, then you can introduce Gold Mini. It's introduced when? Yes, only this -- just recently -- I mean, recently means last year, but not fully. Yes, it is increasing. Gold Mini, the turnover for -- in the month of options is INR 800 crores. So INR 400 crores is the -- INR 4,000 crores is in the main one in October.

In October, what was the total volume in the Gold Mini, sir, options?

INR 808 crores average.

Average INR 800 crores?

INR 808 crores. Daily, ADT. This is ADT. So last year -- last month, it is INR 412 crores. And in fact, it is INR 419 crores in August. September, it is INR 412 crores, but October, it is doubled.

That is fine, the number, and it may be improving or whatever, it exists. So the bigger point is that your ticket size gets...

Ticket size as well as tenure.

So it's a bimonthly as of now.

No, no, Mini is monthly. That's what.

So sir, then, can you have that playbook here in terms of making futures less attractive, making options more attractive.

Our turnover fee -- our -- I mean, margins cannot be -- it's for a product -- no, no, it's for the underlying product, not for contract by contract.

Underlying gold itself.

Underlying is gold, but then in Gold Mini, you can't impose also. If you impose Gold Mini, just to have that kind of crude oil effect on this gold, but in Gold Mini -- gold main contract will also die.

But that itself is not moving much. So for that...

No, no, no, future will -- no, no, no, gold -- futures will die. We'll have a problem.

But even your crude futures is not doing great. It's only your crude options which is the largest part of -- largest...

What I'm saying in gold main, you're saying futures is not doing or options are not doing. But I'm seeing futures is doing better. In fact, the most of the OI comes from the gold and the internationally -- I mean, our Indian domestic jewelers are not allowed to hedge in international market. As a result, the substantial part of our hedging is from the industry substantial, more than 75% or something like that. Now to start increasing the margin, then complaints will go, because we're supposed to link it to something.

So the point is that a set formula and it can't incur...

It's not a formula, but rational should be there.

Sir, so that's what. So while it is doing whatever it is doing, but I'm sure the potential is very big. And while in world and India is different, here the options is the main driver. That is not the case. Even if you let go some of your futures, it can be technically...

It's like bird in hand is worth two in the bush. I will try that and then I lose here and then I lose there, then I will have a problem, because there is a competition also out waiting.

With this logic, you would not have got crude options.

No, crude options the way we -- because it's not there -- others were not there, anyway when the crude options came in. Others were not there...

Different margin for options and future, because suppose I'm selling an option contract.

Optional futures is okay, but then I'm saying Gold Mini will have a different price and Gold Main will have a different futures contract, you cannot do that. That will not, because if going by the thought that is propagated, then Gold Main will have only 10%. Gold Mini can have a 20% margin so that the people will move, but that cannot.

Sir, hedges are mostly in the futures market anyway.

Hedges are mostly in futures. That's right.

So introducing an option, does that really cannibalize the hedges? I mean that part of the industry.

It will impact if I raise the margins in the futures.

So you're saying that demand will shift to options even from the hedges?

No, no. I don't think that will happen. I don't see it happen, but it's not correct. I don't think we have to balance everybody's interest. But to balance...

And the second thing, what the possibility of cash settlement contracts in gold?

That may not come. Wherever it is feasible, the regulator would like to have contracts in this one, what you call, delivery-based stock.

What are you -- means as per your own opinion, this means after this, you have said in the call that you're going to focus on business more from after this transition. So whatever your existing contracts are, which is the product you have lost bullish on, means most positive on that this will do well, you want to tinker most or want to introduce movements, which are the things on the existing ones. I'm not talking about the new ones because...

See, copper, we have applied copper for Mini and that is something which we are looking at it, Copper Mini. And nickel also is completely died down. We were doing about INR 4,000 crores ADT. And now we have asked them Nickel Mini, almost INR 40 lakhs is the contract size.

What is the current pool size of copper?

2.5 tonnes, 1 lot. That is the way it comes delivery. So it can't be lower than that.

That you're applying for Mini. Mini will be what size, sir?

Mini will be earlier is 500 grams -- no, 500 kgs of a tonne.

So that you are -- means, basically, you are saying that will do well?

That is one and then nickel is another one. Nickel also smaller one, not -- we had every 250 kgs.

And no amount of innovation in say, gold is possible apart from the serial contracts.

We are also planning to introduce our -- I mean, we have applied also to 10 grams also. We have a Gold Guinea 8 grams, 10 grams -- petal is 1 gram. Gold Guinea is 8 grams.

Petal also you're launching, right?

Petal is already there. Petal, we have options...

But I think on the call you said petal also. Some new launches related to petal...

No, no, petal is already there. 10 grams is what -- gold 10 grams.

That you call guinea.

Gold Guinea is 8 grams.

10 grams is Mini, that is also there.

No, no. Mini is 100 grams. Gold Mini is 100 grams.

So there will be again suppose volumes take off in that 10-gram option, then there will be option contract on that also because you will require...

If underlying futures increase, then we will launch.

You'll launch?

Everywhere. Wherever there is a feasibility, wherever we are meeting a regulatory compliance requirement, we will launch.

And sir, where we are in the journey of spot exchange and index products?

Spot exchange for coal? You are talking about what for?

Yes, for gold.

Gold spot exchange that is again stuck in the GST. Those issues until they are sorted out, it will not take up because the first guy who is depositing gold he needs credit back. And he will not get it until -- once it is converted into EDRs, and EDRs are not subject to GST. So nobody will pay. And the last guy who is converting the TDR will only pay.

So 3% will become the cost for the person, first person?

For the first person, but if it is paid back, then there is no problem.

It will never be paid back because...

No, no, only at the end, when it is taken out, it will be paid. But he cannot wait till now. It may take 2 years, 1 year, how will it be. So they have to address it.

Possibility of some relaxation there?

Some discussions have taken place. Nothing happened. That's why both exchanges have launched the big brothers, but then nothing happened.

We have launched...

Spot exchange.

Spot exchange is launched because GST is a problem.

Because of GST is a problem, nothing happened.

But if all of them try to kind of lobby for this requirement, then should not be that MCX is...

No, no, they are trying, but then we have tried for a different model also. We do have a problem. It's not just there. But we have a different problem, GST issues. So we have been approaching the government and requesting them to reconsider the way that it is signed. We are not asking for any concession, not even a single duty concession. The way it is administered is important.

And sir, in terms of an index, any index that you're thinking of?

Index products has become a big challenge for us. The reason is, again, the deception has caused this. Earlier, we were talking about INR 300 crores ADT in the metal contracts almost all, metal indices or METLDEX. And thanks to nickel, then everything went haywire and we had to reconstitute the nickel index and -- no, metal index, METLDEX rather, and we removed the nickel from that and then only 4 metals are now there. And that is to be relaunched. So that is not done as yet. We will do that. And basically, in the -- unlike your equity markets, this index is a written index, because already price embedded in the -- this one when derivatives -- I mean, traded price is embedded. What you get is the return from near month to next month and third month, that is the only thing that is reflecting, nothing else. So that is the challenge we are facing at this point in time. That is why index products is difficult to get them unless there is an arbitrage opportunity between the index and the underlying contracts.

We are also looking at having a DMA option, right? We are working on that, right?

DMA, we should be able to do that. That is one thing we are planning to launch. And in fact, it is there in the existing system. We tested and everything is there in place. We will announce to the market.

So sir, but how does it help in deepening the market, because there are some FIIs who are looking at it?

FIIs want to come through via DMA, so that is why we launch them, they will join.

But any idea how -- what would be the impact of DMA in terms of volumes? You would have done that study, right...

No, no, no. You see DMA is one of the tools that are needed for them to participate, so we have built it from day 1, because they're in equity markets. So we have not done any cost benefit analysis, what is that extra will cost me if I provide the service and then nothing of that kind.

But FIIs got better commodity exchanges outside India. So we should not expect much out of it, right?

I don't see that view to be holding good all the time. The reason being is that prices all the time need not move the way that internationally it is moving. There is always an arbitrage opportunity, point number one. Number two, that your prices are rupee-denominated, whereas the international is dollar-denominated.

It would be about like dollar...

No, no. But then those who are trading in India, they can take advantage of that. Third, there is a calendar spread contracts. There will be a calendar spread also. Although -- I mean, some of the contracts may be listed in other markets, but the calendar spread may be different here, and they can take advantage of it.

So sir, then why AIF CAT 3 funds that was also allowed a few years back, it did not take off? This all benefits, even they would have got it, right? What do you think in your assessment why that segment did not take off?

No, no, you're absolutely right. We have been approaching them. There are so many limits on that. Much like mutual fund. Now a, mutual funds cannot hold other than gold. Even gold also earlier, they had only 30 days, they can hold it, that will be relaxed to 180 days, if I'm not mistaken. Now what about other metals, metals is 30 days. Your contract itself will take more than 30 days for that metal to go out of your books. And if somebody is holding a calendar spread contract, he will buy it this month, he will sell it only in the far month then he has to hold necessarily for 2 months, 3 months, 4 months, whatever it is. So will that work for them? So the design of the regulation itself is prohibiting them to participate. That's true for the others also.

Sir, and just for the serial contract that you're talking about, what is the time line that you're expecting that can go live?

It will take time, it will take time. Because one is that he has to first approve it, regulators have to approve it. And then thereafter, we will work on it. But we have to build that in the system also, we have to make some changes. At least, we will keep it ready in the next 6 months' time in the system.

Say at least 1 year till...

We can predict, but then I don't want to guess...

You already had some kind of experience in the past.

That is the reason.

Steel rebar means what will be the -- there also, there's some time line?

Steel rebars, no. We -- see the day we get a permission, we will take about 3 months to actually activate that contract, because you need to tie up with the warehouses, you need to do -- make you more...

There you will require certification also, means that will be a footwork, you'll be certifying the vendors, right?

No, we will not be doing that. As I said, that's why those, who are empaneled by so and so will be first they will be permitted. And thereafter, we will start this empanelment process. To begin with, we'll go by that.

To begin with which we will go with the approved vendors of railways and all?

Our railways and MES, military engineering service, and national building construction. They all have some panels.

Sir, in your assessment, what has led to this increase in crude options volume as you hindsight what do you think has worked?

See, what I'm thinking is, definitely, the margins in that underlying has pushed them to go for this, no doubt about it. The second important thing is that the volatility in the last this, whatever, 1 or 2 years, it's been higher than what it was in the past. It was in the past. That is the reason why it is...

Even cash settlement helps?

Of course, it does. For that matter, for any product, cash settlement is an incentive, no doubt about it. Look at this GST, whether -- I mean, you end up getting a registration means, then you may get delivery in Delhi, delivery in Kolkata, then you need to have registrations at all 4 places, why at all as a financial player, why at all, you would take all these registrations and then end up filing returns and all that, if you are not interested.

This rapid rise in this digital brokers, discount brokers that has also made the ecosystem favorable for you. Do you think that is also helping?

Well, it did help, no doubt about it. But the point is the number of active investors, who are participating not represented by the number that they upload on the exchange. So when you register with the ABC member, he will say that is for equities, currency, commodity, whatnot, and you may be signing it like them. And maybe our number may be 1.5 crores or something like that. But then the number is about 6.25 lakhs or something of that kind, isn't it, that is what it is. The number of unique investors, who are trading it. And minis will definitely help us more.

Sorry, what minis are you talking about?

Mini contracts will help to bring in more and more investors.

They're already there?

Only in some, not everywhere.

I thought gold is biggest...

Metals also, we are looking at.

Historically, the potential that gold has like no other metal can match...

That's what. But that is -- I know that. But corresponding with this. I know, that's what it is.

So the point is that historically, the potential that gold has what we saw in '12, '13, no other metal can match with that kind of potential. So the point is that if gold has not moving up meaningfully, then we expect other metals to contribute, wouldn't that be a little far-fetched?

In fact, I mean, gold for retail participation is fine. But basic distinction that we have to make equity versus this market, this is a hedging, this is primarily for hedging that is for investment. There are so many investors and why are not here? I will have no answer because it's not for us to define or convert this market into a smaller place, and that's smaller lots and then say that everybody should come and trade. No, that's not. It's -- that's not at all the interest. But in the case of metals and other things, I'm looking forward to have more and more SMEs to play a greater role in this. That is what our focus is going to be. If you see in metals, our open interest has increased. I don't know whether you noticed it. Open interest is very critical for other players to provide liquidity. We have been engaging with some of the organizations, which are working with SMEs, so that they need a structure where they can participate without fully knowing the nuances of the hedging. Many may not be knowing it. During the COVID period, many units have been shut down only because of the price for it. That's what the interactions with other industry associations and other things because of this. So we are also trying to figure out how do we help them to come through some kind of a structure, which will help them to hedge. Simultaneously, they in turn hedge on the exchange platform on their behalf and not to worry about on a daily margins and all that kind of things. And when we have interacted with one big hedger, in fact they said, I'm not interested in a daily basis, take payout, pay-in deal. I will give INR 100 crores, INR 50 crores, whatever it is bank guarantee, the broker manage all my issues, but then that doesn't work here. So there is a representation also we have made to the government -- I mean, SEBI on this kind of thing, where the investors will be able to -- big players will be able to give a kind of a margin in the form of bank guarantee and other. And then they should be able to not to worry about on a day-to-day basis payment of what you call M2M, et cetera. Maybe broker can arrange with the help of some financier or with the bank where that bridge loan or whatever you call it, they will give it and then accommodate that.

Internally, have you done any classification between what percentage are hedge speculators or corporates, retail, any internal...

If it is not in the public domain, I will not be, but then we have already done it, we know that. But it varies from product to product, varies from product-to-product. Come again? But this is in the public domain. This is different. This is on the website, we are displaying it how many hedgers are participating, whether we're supposed to be displaying that. But only that information we have it. But then percentage-wise, we are not bifurcating.

Assuming that the margins...

See, currently, brokers have to physically take out that margin from that exchange and then deposit here, then we will give a credit. But there is a, what you call, a discussion where the members association, brokers association is asking that they should be able to without shifting physically the margin from whichever action that it is deposited, if the other exchange requirements are met, they should be able to trade on the MCX also or any other exchange for them or vice versa. If the other exchange confirms, yes, I am blocking so much money for this exchange and then they can trade on the other exchange and confirmation...

How practical is that?

It is practical. It is practical, but it has to be implemented, because after 3:30 equity markets are closed. And brokers would like to use that surplus that they have in the other exchange. And I think that is something -- that idea should work.

Is the regulator receptive about that? Because we are talking about that for a long time...

Industry Association is taken actively with that. It should work.

Have they been receptive, the regulators?

Of course, they are, they are. They are looking at pros and cons of it. Yes, the gentleman wants...

Sir, just continuing on that, you mentioned about that INR 500 crores to INR 1,000 crores kind of a number when the turnover reaches where you can -- you typically regulator, so how does that work, if you can just elaborate...

Come again?

When the futures turnover crosses a particular monthly threshold of INR 500 crores, INR 1,000 crores in terms of liquid volumes, right? That's when you launch options, right? So just wanted to understand that...

INR 1,000 crores is the requirement for non-agri commodities and [indiscernible] the average daily turnover over a year has to be INR 1,000 crores. It's not a particular day. For agri commodities, it is INR 100 crores; INR 200 crores, agri commodities.

Sir, second, let me continue the other question on that crude oil option -- the rising crude oil option, you're coinciding with a lot of algo-trading happening and like bulk participation comes from there. How sustainable do you think this would be in your opinion?

It is sustainable. In fact, some more players are waiting to join, because they didn't join because our technology platform is in transition. Some of the big players have taken membership. And they are trading through some member or something like that. Then full-fledged, they've not sorted, they will start. It is -- interest is growing, not decreasing.

Ultimately, it depends on the volatility, right? Volatility...

Of course. That is true for Sensex or Nifty and everything.

But there is a volatility history in Sensex and Nifty for a long time. In crude, it started like 2, 3 years back this kind of volatility. This kind of volatility was not there on crude. Ultimately, it depends on that.

That's why I said that I acknowledge that volatility is important.

Just on the cost side that you are cutting down, so what can be this -- you said...

See there is no link -- it's not linked to the turnover. So as far as the technology costs are concerned, that's what the point we have made. And because of this depreciation and other, there will be -- the next 2, 3, 4 years, it will be of the existing order, that's what we've mentioned also. Thereafter, it should taper off.

For the sales, 63 Moons, you'll be paying to last this quarter, right, sir?

Come again?

For 63 Moons, you'll be paying till this quarter, right? That is the contractual, right?

Yes.

March quarter is the first quarter when you will be on the -- financially, you will be on the new software, right?

Yes, yes. yes. This quarter also partly, there will be some charge in this quarter. We have gone live from 16th...

OpEx or depreciation charges?

Both OpEx plus depreciation charges.

You have actually in this quarter also for the -- that one line item computer or something there, you have taken some expense, right?

That is about the laptops and other thing. That is anything INR 1 lakh and below, we write it off the same quarter.

That's a onetime thing, right?

For onetime.

So on a steady-state basis, whatever number you have capitalized for the software, so depreciation on that will be the expense item from FY '25 onwards?

From this quarter onwards.

From this quarter itself, right? Because you have now...

Gone live from 16th.

Okay. So that will -- so in this quarter, you will have the depreciation amount on that plus whatever you're going to pay for 63 Moons, both these things will be there?

That's the operating expenses for the new collection.

For the new collection. So in a steady...

Next year, October '24, then the AMC to TCS -- one year warranty.

We are just -- I'm just trying to understand, in the steady state FY '25, what are the expense items, which will be there for the new software? One is depreciation other is the OpEx for that software, right? In the middle of the year.

From October '24, AMC...

AMC, there'll be 3 line items for the software, right, which will be a cost for you -- for MCX. What is the -- what will be the largest cost option -- cost portion, means the OpEx or the depreciation?

Depreciation will be the largest. Anything else?

I have one. What are the operational challenges with like the gold hedging being maximized, because I understand it's supposed to happen, but the numbers don't reflect that the hedging is that -- there's too many entities for that number to not be a higher number. So what are the those -- gold hedging has to be on our exchanges, right? So that number doesn't reflect the gold tonnage in India. So like why is that open interest so low for gold?

Okay. Look, in Asia, if you consume 800 metric tonnes of gold, 800 metric tonnes will not be reflected. What is in trade is what -- I mean if it's consumer then it moves out of their books.

But do you think that number is like genuine...

It's about 15 metric tonnes is there and at what times we see 30 metric tonnes on the exchange platform. Everybody does hedging or not, that is a challenge. That's what I am saying 15.97 metric tonnes, it is as of now. That's there on the website also. So it's 16 metric tonnes is hedged. And all big players hedge. And we have interest upon the RBI and many others also wrote that the bank should insist whenever they are extending loans on commodities and et cetera there, they should insist that they should hedge their commodity risk. Otherwise, it will backfire on them also when things go wrong. That is something which is very important. We have been engaging with IBA and banks to enforce this, because they had given advisory in the case of agriculture commodities, but not for this.

But sir, it's also true that all those 800 metric tonnes of gold is imported.

No.

So you guys would be basically hedging it on global exchanges.

No, they are not allowed. They are not allowed. What I'm saying if it is -- once it is consumed as a consumer, I buy it out, then it will not be there.

That is true, that is true, but anyway, that gold doesn't trade any which way. I'm a consumer, I consume 800 tonnes...

I'll tell you, let us say there's 10 metric tonnes from Titan, okay, what is there in the inventory in the shops. Now the moment it is taken out, that 10 metric tonnes will be constantly, some of these are coming in something. So they have to hedge only 10 metric tonnes. But in a year, they must be selling 100 metric tonnes. That's the point I'm making.

No, no, no, I agree. But with 10 metric tonnes, they will be hedging it on global exchanges?

No, no. None of them are allowed to hedge. They are doing it, let me tell you, repeat major, major players in the country are hedging on MCX. There's no doubt about it. Satyajeet, is that okay?

Yes. Yes.

We're done?

Yes, please.

Okay. Thank you. Thanks to all of you.

Thank you. Thank you so much.