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

Thank you for giving us the opportunity to [indiscernible] and ask questions. The primary objective of this meeting is [indiscernible] coverage, and we wanted to have some questions answered particularly by macro, some micro. We're trying to figure out for us. So we have been tracking exchanges for last couple of years. And we have been presenting every con call. But many questions will be slightly [ difficult ]. So I have the list of questions. I'll just start.

Yes, please.

The first question is on the key reasons between FY '18 to FY'20 or let's say FY '20, we had a huge volume in crude and natural gas, right? The volumes have declined and one of the result is -- one of the key reason is the margins -- [ crude ] margins. So probably [indiscernible] margins to come down in the next [ 2 years ] or do you think this is going to sustain and the volumes in crude and natural gas will be on the lower side compared to the industry?

See, peak margin reporting, it is, in fact, SEBI has made it mandatary across [indiscernible]. So it is not only to the commodities market. It is applicable for all the asset classes. So basically, what it means is, sufficient margin have to be collected from the client whenever they would like to [ talk front ] margins. That means before it trades, that margins have to be collected by the member. So that will be looked at by the clearing corporation. If the margins are not being collected by them, automatically, penalty will be struck .So given that one, it is like earlier some numbers that use to support their clients in between. That means because they use it to get particular -- till the end of the day. They would have that opportunity to help their clients to provide that kind of margin support so that they can be able to meet the requirement. From the clearing corporation's point of view, always sufficient margins were there. That means whether it is on behalf of the client or on the behalf of the number -- because from the clearing corporation point of view, you will look at the clearing number, not at the client. So when you look at -- okay, this is an amount of open interest is there, and against that one, whether you have sufficient margins are there from the number or not, that is what you look at it. So you use it to look at it. Even today, you are looking at it. But the only difference now what is being brought in is like client level. That means, they are supposed to report to the clearing corporation that whether they have collected some margins from their clients or not. So they have to do that report. That, too, how do they have to do it means, they will look at what was their peak position. So at that time, whether that's sufficient amount related to that peak position, whether that margin was with the member or not. If any deficiency is there, it means that you have not collected sufficient margin from the client. So that made some of the members really difficult to fund any clients, at least intraday. At the end of the day, anyway that used to happen. Even prior to that one, it used to happen. Intraday, they used to support that one. But with the implementation of this peak margin reporting, they no more could be able to provide this kind of facility to their clients. So what happened now means many clients are not really comfortable to have sufficient margin throughout the day. For example, because commodities have traded round the clock. So the volatility can [ come ], but maybe very late even -- in fact, for commodities, given they are global in nature, most of the activity will come in the second half rather than the first half. This has put some clients in a fix. Because for them, I brought the money and everything, I kept it. But suddenly, that became insufficient. So they need to bring that one. So what they started doing is, even though I'm interested in commodities, rather than doing in futures, I want to trade it in options. So it's not like every client is looking in that direction. It is certain category of clients who are really very averse to this kind of changing margin and other things. They are preferring options over futures. Why? In options, upfront premiums have had to be paid. Once premium amount is made, and after that [ I mean ] how to look into that? That means there is no more incremental margin figure that is going to come. That means, he will not be bothered about any margin, so you can maintain it. So given that kind of scenario, what is happening is, now, there is slight drop, that is what we have witnessed in the futures. But there is a substantial exponential growth, that is what we witnessed in the options. So a slight drop in here. It is so. If you look at overall cliental participation, both futures and options are put together. In fact, there is very -- amount what I call last quarter, if you put it, it is higher than the previous corresponding quarter. Okay? That is how the [ number ] is. Now to your question, whether the margins will continue to impact means, those -- like crude oil, there was a drop in the futures turnover. But a substantial amount of turnover is now being witnessed in the crude oil options as well as natural gas options.

So my question is that has the margin for crude which get up to 20% -- or 20%, right, for some time...

For some time it was strong.

Now it is at [ 15% to 20% ]. Is this going down in the future? Or do you think this is a level which is... Is covered by the formulae or is this something temporarily ad hoc?

See, there are two elements that will come into that when you want to decide the margin. One is your volatility-based margins. Volatility-based means we use the EWMA methodology. And based on that one, we will see that if at all, there is an incremental volatility happens, automatically, your margin numbers also will go for a change. Second thing what it comes means it is SGF-related work margins. So here what will happen means -- because in the stress test, you have to see that sufficient -- this SGF should be there with the clearing corporation to ensure that you can be able to -- because the moment you have not collected sufficient margins from the client, then it means that you need to have a higher SGF. But the problem here is, today, it is a one-way problem. Like the moment you can fund the SGF, but you cannot take it back. So given that kind of thing, even we are our -- we are not ready to put that money in SGF. Any incremental requirements, suppose if anything comes from SGF, [ requirements ] kind of thing, so we are not ready to keep that. I think we are rather waiting for SEBI to come out with a revised mechanism, wherein actually their -- there's a committee called RMRC, it's there in SEBI, which looks after all these kind of risk-related matters. They are going to meet. And all the exchanges earlier they came together, and they have recommended to the SEBI also, saying that you at least don't keep any one-way kind of restriction. Let, as and when needed, exchanges of the cleaning corporations, they will be ready to ensure that particular thing. But at the same time, allow them to take the funds also out. The moment that is out -- but today it is not allowed, but we are expecting that they are going to meet sometime in the end of August or maybe early September. If they meet and they take a decision, which, in fact, all the exchanges and clearing corporations have endorsed that kind of mechanism, and report also have been given to the SEBI on that one. So if we accept it, then it is like we can infuse and we can be able to take it. If that is the case, then any margin other than volatility-based margin, can be able to bring down. Like whatever additional margins we are imposing today, just to accommodate that kind of SGF requirement to reduce the -- keep the SGF under control, that kind of margins can be immediately removed. So that it is like more participants can take benefit out of lower margins.

So one of my questions still is whether this 20% will go down to...

If that is that accepted, that kind of SGF, everything is deferent. There is some room is there for lowering the margins, bringing it down. Margins can come down.

SGF will go up for...

Then what Praveen says is that at first, there's a stress test. And in the stress case, the figure had increased. There's a minimum required [ copper ], MRC, which is a subset of the [ SG&A ]. So that goes up, who has to give it presently the exchange as well as a clearing corporation. So they'll fund it. But next time, there is another stress test that's maybe 3 months down, it's not monthly, it is another stress test that -- and the figure reduces, the MRC reduces, then we should get it back. That money should be refunded back, right? So it's a two-way. Presently, only one-way.

What will happen means, if that is the case, we can -- if volatility come down in crude oil substantially, we'll be in a position to bring down the margins if we see it's going to come in. At the same time, stability also will come. For example, now for any reason, I will not be able to infuse the capital in the SGF and I need to end up hiking the margins towards additional margin and other things. But those things will stop happening. As and when this is going to -- we are going to put this on increase.

Sir, on the metals, we see lost nickel volumes. I think it was INR 21 billion in the month of January. [ ATT ] was INR 21 billion.

21 -- ATT is around -- okay, INR 21 billion you are saying. Yes, it is around INR 2,000 crores, I can say, INR 2,000 crores. Yes. We all know that it's all that debacle happen at [ LME ]. And unfortunately, it is like we had impacted the most because that time the margins also has to be -- substantially has been increased during that particular time. And after those things have settled down in global market also, here, it took a lot of time to get stability to come into this market. So what happened is, by the time the margins and everything has come down, by the time the volumes, whatever volumes were there, it got evaporated. Now the way we are looking at this contract is, we wanted to come out with some mini-sized versions of the contract rather than bigger versions. Because today, the nickel contract is about INR 30 lakhs to INR 40 lakhs, given the size, whatever it is, 1.5 metric tonne contract. It is very quite significant, and that will not attract any retail participants to come and trade in this contract. Earlier, we used have both main contract and mini contract to use it on that. But subsequent to the SEBI regulation, wherein the regulation was such that we cannot have 2 variants. We need to have only 1 variant. And given that one either, you go for bigger one or smaller one. Besides this one, there is another regulation that says that your trading unit also should be equal to your delivering unit. But when nickel gets imported to Indian market, you get it only in around that 1.5 metric tonne. You cannot cut into bricks. Because the moment I say that cut into pieces, then quality and another things -- it is like you are breaking that whatever is the seal kind of thing. So wherein then automatically, you will not be able to do it. So we are looking for a mechanism which we used earlier, also use it to have in, wherein we wanted to have a slightly different trading and delivery unit kind of thing and come out with a smaller version, the nickel contract. That is going to be the one which we wanted to push it. And we have been making the representation to SEBI. So that -- and they are also comfortable. I think as soon they may be access to that kind of thing -- because unless -- SEBI is not like any other equity market, where you can easily be able to cut down the trading lot. Because there, it is more about the value. And it is nothing to do -- and [ VMAX ], you can do it in 1 unit also. But here, it is not. There is actually physical market there. I mean, it is integration between derivative market and the physical market. So here, you require -- certain concessions are required in this case. And then globally also, many of the exchanges, like if you take the Shanghai and other thing, they also come out with this kind of different versions. And they also have a differential trading unit, delivery unit and all those things. It gives some amount of flexibility to the exchanges to design the contract. So that is what we are asking for and we wanted because at these big sites, we cannot expect immediately that again, the contract will become so vibrant and back to its original level. We want to make some tweaks in the contract, and we wait for the opportunity. Like, even if you look at the options, it was lull for almost from 3, 4 years. Now today, even after imposition of trading charges and other things, you are substantially [ lower ]. So we cannot say what really [ you think ]. But from our side, we are pushing hard, saying that to accommodate these kind of changes in our contract certification, as and when it is there, we want it to refurbish and we want to launch it again.

When can we expect to relaunch this nickel contracts?

All in these cases, what will happen is, we are actually dependent on the regulatory thing. But same...

I mean, for you to get the regulatory approval of any new...

If at all there is a normal-thing course, it won't take much time. If it is a very basic contract and other things, then it may take some 6 months or something roughly. But if at all they have any doubts about that particular contract and other thing, it may take like -- for example, the electricity is one thing, which we have -- from our side, we have filed it. But it is -- Supreme Court also has said that the committee have to be formed, a joint committee between CERC and this one. There, actually things are getting delayed. But other contracts, the normal course what we have seen, and there, we used to get in 6 to 12 months, whatever is there. But any changes which is a slight deviation to the normal one, which might take some time, which is very, very difficult to predict.

So why don't you continue with the normal business...

Normal is continuing. It is there, but we are not able to get the liquidity in that one. Because see, once that cycle is broken, you need to do something to again back up and do it, so that, again, you start turning the wheel.

[indiscernible] is stable, right? Still?

That is what -- and the advantage that they have it is -- it is like they are back after that particular incident and other thing there -- margins are back to normal and everything is there. But for us to come back because of all these challenges, it is taking time. But we are, anyway, pursuing the matter vigorously, from our side, with the regulator. And they are also now looking at it because all -- unfortunately, what happened is, all this kind of [ black ] events, all happened in a very short time within this last 1 or 2 years. So that's what is destabilizing that thing.

So on the new categories of products, especially the metals, there's a wide area of products which are not there, which have not been carried on any of the changes. Do you think that some of them are very promising, especially the steel, which is a very large commodity? And if I am not wrong, I think one of the competitor had a very, very large volume in there. Steel, it has gone back up.

No, CTX was having the steel contract long time back.

[indiscernible].

I see [ I6 ] I think that one, but that is not considered as actually a competitor. In fact, their membership also was limited only...

It was a large -- a very large steel volume.

No, no. Actually, only for some limited period, were they and -- but if at all you wanted to take it, but it was very long time back. Even we use it to have it very -- from almost, I can say, some 10 years -- more than 10 years back like that. But that time, the challenge was related to the BIS standards because the industry has not actually fully adopted the BIS standard. Wherein when you are specifying certain qualities and other things, they are not able to meet the particular thing. Today, the industry is fully prepared, that way it is. And we wanted to come out of that steel TMT and other things. So there is a big market there, but still TMT. And we definitely wanted to look for that steel product.

Is there any other market -- international market, potentially...

[ Trainees ] exchanges are happening.

Is this something only European or...

Yes. LME tried multiple times, but liquidity is not that much.

Because it still is widely used...

Widely used. Okay. Reasons you are looking for -- the reasons why it is not -- it is not that much standardized as well as metals. If you take it, metals, you are having cathodes, you have certain finer things. But here, you'll have multiple -- I think you have flat, you have long, you have -- then, again, within that one, hot, cold, all those things are there. And besides that one, the quality also was a certain thing. And there is certain very popular brands there, which is enjoying certain premium. Wherein there are some local industries, the domestic industry, which is into that one. A lot of scrap also get into this thing. So this is, I think, it is very diversified market. It was not that -- because generally, what will happen is, you have taken from a mine and a little bit process, then it is very easy for you to develop a product or something. But once it is multiple, like in this case, steel, it is you have stainless, you have multiple variants, multiple grades are there. So when you are going to the process, which process unit you are looking at? Then you are limiting to only particular category of participants. So earlier even iron was tried. Like the iron was one thing, another product, can it be tried and other things. But there also, it is like mining restrictions and other things. It came and it could not be able to fly, okay? But steel, the only thing is given that kind of multiple product categories and other things, it is one thing which steel TMT, we have out of after deliberating multiple rounds of discussions. We thought that, okay, this is one product, [indiscernible]. Once, one is that [indiscernible] can really can look for 1 or 2 products. I think globally, also if I'm not wrong, seriously that 1 or 2 products of steel only is getting traded on their exchanges.

The question comes a bit [indiscernible] because steel is the one of most mildly used commodities in the economy right now. The obvious question...

But I feel that there is there is a [ case reserved ] for really now, has come back to the earlier thing. Because earlier our contracts all cash settled, metal contracts especially. So at that time, really market participants were not prepared for any GST or this kind of taxation structure. And delivery also, not every investor is interested in that. But today, metals all have been converted into delivery basis. Today, delivery means it no more is really a big matter. Everybody really knows that what a delivery means, how it happens, how they have to handle it. So now, the [ teams ] are in place as compared to that one. And also, standards have been adopted in the industry. Now one thing the regulator also -- he's asking us is -- they wanted to have delivery locations at one time. What we are looking at is, we want to start with a single location and go for multiple location at a later stage. Steel, one thing which still is under the discussion, it is happening because we thought that the moment you add multiple delivery in one time, again, all those issues will come. Let one product get adjusted, market participants get adjusted to this particular thing, then we go on expanding et cetera. And slightly, the locations are also -- it may be near to our existing delivery locations, but it's precisely not that way. So we need to look at all these things before really identifying. So we wanted to start with one rather than with multiple delivery locations.

So I think you started with TMTs and going to [ HRC ]...

All those things, we will, wherever possible and [indiscernible]. But we wanted to start with what, [ 1 lakh ]. Lot of standardization is there, already which is in place.

And given everything the timeline which looks like at this point of time is 12 months for steel?

We already have [ Jenny ], long time back. So it's not like...

It's not the metal side, which we are missing, which is traded widely in the global markets.

All the major ones have already been -- I can say that some chemicals maybe we have to look at another -- there are many exotic products that are getting traded. But metals-wise, it is very limited because the base metals are very limited.

Is there any chance that a lot of exotic products will come in or do you think they are very far away...

See, one thing we see, all these markets have evolved over a period of time. It didn't happen in 1 day. You have the same number of market participants. So whoever are our active, suppose, 500 to 600 members, they will remain our [ participants ]. I cannot go on sell 1 day this product you trade, the other day I say that you trade on the other one. Even they have to take it to their customers, and all those things are there. And it takes marathon effort to really make 1 product really successful. And even after the launch, continuous effort, continuous education, taking the stakeholders along because in many cases, we don't even have the price history for the people. So when they -- wanted to somebody. Somebody will have to do a comparison between the spot and futures, but spot prices are rarely available in this case, and which quality. Exchange quality can be different. And whatever available spot prices can be different. So these are all multiple things. The only thing is, it is a very long-drawn process, at least to identify. The one suggestion what is there is, don't come out with too many products in one go and try to sell it. First, make a sincere effort in that one and make it profitable wherever you feel that good business is going to come. And trading cost is higher in India. It's not like in case of like -- in their case, you can come out with any product and people are not interested, you can drop it here. if you come out with a product and somebody makes it trading, then there is a cost for them, it is getting involved. But even they wanted to trade, if you accommodate trading, they will think twice before trade in [indiscernible] because there is a cost -- trading cost and everything. So our plan or what I can say is our strategy behind this one is, what can we try towards the integration of physical and futures market, wherein that is the reason what we have been doing is on that count, we are imperilling the brands. And all the metals already we have-- lead already, we have started. I think soon we will be imperilling some more brands. And in gold, we already have don't it. And we'll doing with more other -- like more metals and other things kind of [ amend ]. So don't expect that these just will come and trade on a day-to-day basis. But it makes the market -- 2 markets really closely integrated. That is what we are looking at. Everybody has a different objective. [ Effecture ] has a different objective. Either go for a price switch or use the platform as a delivery, make a loss, because if he's getting a better customer, for them, that is more easier, convenient way to dispose of any metal. So why somebody will come for delivering means it is a delivery of loss. This is a universal phenomenon. Derivative markets are not meant for delivery. Because there could be many reasons. Delivery locations can be different, quality can be different, some -- you can use it in case if at all you intend it for your own purpose. Today, aluminum and other things we are seeing very good progress in this. A lot of deliveries are happening in that aluminum contract. So while we wanted to make a mechanism in place -- efficient delivery mechanism in place so that whenever somebody wanted to deliver, let it happen, easily, and in more convenient way. So by keeping that one, we are imperilling all these things. More people means more domestically, our industry also will come into this one. So that is how we want to -- we are working towards that one.

So on the option, you've introduced natural gas. Do you think you ought to need some more option [ products ]? And does it matter if you reduce the volume while you say the [indiscernible] the options, that can increase the [ one-way substantially ], maybe the options?

See, options-wise, we wanted to come out with options in multiple products. There are certain regulations out there. Like if it is an option on futures, you would -- the product is supposed to meet -- the underlying futures is supposed to meet a particular amount of turnover, like INR 1,000 crores in case of nonagricultural commodity. That means essentially, you need to have a liquid futures before coming out with an option contract. So now the immediate -- the thought that what we can -- what we are really looking at it is while crude oil and natural has really picked up very well, even though the duration, one reason is both are -- futures are [ casted ] contracts in a way. And whereas the gold and other [ commodities ], they are not delivery-based contract. One more aspect is, gold and silver contracts are [ bimonthly ] contracts. So longer the duration, tenure is there, premium -- extra premium, somebody will have to begin to make it. So even if you look at our gold premium turnover, 1 month, it will be very high; 1 month, it will be low. This is happening because as you come closer to the expiry, premiums will come down. More people can look at it because it will be more convenient. Otherwise, the premium will go. So even if you look at the equity market, people are more interested in shorter-duration contract. Weekly are most popular as compared to this. So we are thinking like -- so one thing is, we are looking for definitely options in our indices, which we can look for weekly and -- everything you can look at it. But metal that we to choose to be very popular. Unfortunately, the nickel impact also has felt on our metal thing, which used to do somewhere around 200 to 300, which was considered very -- in fact, market was -- why can't we remove the nickel right now and do it. But anyway, this is going to happen. Because there are certain criteria that are embedded in this indices, that it has to meet any product to be a part of the inventory, it has to meet this much of turnover and other things. So every rebalancing automatically, that kind of change will automatically will take place. But while -- [ gold ex ] continues to do well. But because of this metal decks, we are looking at only [ gold ex ] currently, to have some weekly options and weekly futures in this one. And later, I think, once nickel is removed and we just again get back some amount of liquidity in our metal index also, then definitely, we will look there also for introduction of weekly option.

So for clarification, the margins option in the crude volumes, are they similar to crude futures?

See, generally, if you understand the stat, it is like -- depends upon whether it is at the money or whether it is out of the money. There are certain things there. Roughly, if you are at the money and in the money -- because in the money means your delta will be closer to your futures and it will be very much closer to your margins. But if you go out of the money, another thing, provided that minimum margin, they call it [ SPOM ], that means minimum margin will be -- some amount will be there. If that is the case, that is not triggered, it will be slightly different or compared to your deep-in-the-money contract...

My question is that the option writer, does the nature of the underlying, not the [ commodity ], the different commodities, which is the crude, once we had negative prices, the margins spike up. Does it have any impact on the options writer margins or this has no correlation?

You will have. It will be margins if you are in the deep in the money and other thing, closer to delta. Whatever feature is there, it will have the same implications on options. But what you have to look at is who are the participants who are trading, who are happy to trade as an option writer. If you take in features, you have both on the long and short, both parties are -- all participants are equally interested to trading these. But here, generally, a specialized people who really can write it. Because generally, a lot of algos runs here. But then really, the margin is not a concern. I take a position in futures. I take a position in options. It's a balanced equation. When I take a balanced equation, my overall margin also will come down because I'm having the spread position here. I -- they are the spread margin benefit and everything I will -- because, in fact, in SPAN, both are going to be based on the delta. Automatically it calculates, automatically it negates your margin if you are having a spread position in futures as well as options, you'll enjoy the benefit.

Do you think the electronic spot changes with the government is trying to create for various metal, does we have any role to play?

One, I think you would be knowing, I think, in the GIFT City already, we have started our thing. I think it started already, operations. In domestic market, it is like they have started, it's only with gold. There, while SEBI has come out with regulations, still that GST -- there is a GST element is that which is putting certain [indiscernible]. Even we are not fully prepared from the technology point of view because we are also waiting for our CDP project is going on, where we are awaiting for that thing. Once this gets stability, definitely, we can take this one from there. We can be able to develop that particular platform. Okay? So why? GST is one thing which really is playing against that, and SEBI also definitely took up the matter with the government, and all those things are going on. It will take some time. We don't know how long it will take. But it is a blessing in disguise while we are, anyway, working on the other side also.

My question was slightly on the longer-term perspective. Do you think the exchanges like MCX will have a larger role to play to create electronic spot exchange...

Like coal, already, we are very -- in fact, we wanted to do it for coal.

Because we don't have these spot exchange for so many like copper, lead.

There are -- the aspects that really we have to look at it here is, strangely in India, you have first developed derivative market, then I think you also start up with spot market. But what we are doing is, we also tried -- like one way of look -- how we are doing is, the existing futures, we have multiplied our delivery locations, and you already have a 5-day tender period. In a way, its during 5-day, mimicking our spot market. But definitely here, like when you want to look for more product -- because more variance can be traded in the spot market as compared to a derivative market. That is absolutely -- so we wanted to first select certain 2, 3 products like I said, coal is one thing that really we are looking at first, then gold is another one. Another -- gold anyway, we have already started and doing it. One by one, we wanted to come out. And once we get the platform also ready and all these things, then we can freely -- we can really explore all these things.

So where is the work on this coal right now. I think the Government of India...

Government has not yet -- but they have -- already, they have commissioned some study, and that report has already has been submitted to the ministry. So it is in the early stages of discussion, but we wanted things before that comes in. We wanted to be well established or we want to be well placed, so that we can able to do the things.

This is one of the, I think, delivery or, let's say, one of the major delivery for the [ coal ], particularly year is establishment of coal [ tender ] platform. I don't know if that is bilateral. What they're speaking about?

Yes, they are talking about the same platform.

Whatever [indiscernible] coal.

They are taking about the same thing, exchanges, they wanted to talk about.

Because given the fact that they are for the commercial coal mining, is a huge...

That's not -- they have to -- we are now -- currently, production is majorly dominated by [ CII ] and also -- those things -- that's right. But whomever we have also tied up with metal junction, [ M ] junction, who are already facilitating these kind of auctions, coal auction, and they're having good hold in the physical market and others. So we wanted to like a joint venture we were looking...

Are you looking -- would you be open to the idea of up in SPV or you'll be trying to get everything as of this particular platform?

This platform will be used only for -- see, one thing we want you to understand is, SEBI is not overseeing the spot market. This will be used only for SEBI regulators.

So the gold will become...

Gold can be [ variable ] but not we are saying...

Of course, there is no clarity this point in time. But SEBI, of course, are likely to play [ nice on gold ]. Because the economy spot exchanges you talk about, is this gold spot comes in SEBI, right?

Because they are regulating even vault managers, and they are -- in fact, they are not calling it as a physical gold. They calling the electronic security, converted into that.

What do you think of starting the gas exhangood evening? I think we're interested and then...

Currently, that is still and -- even I think IGX already have made their inroad. But even that regulations are not placed and the GAIL is having the complete control over the pipeline distribution channel, these are all some of the things that have to...

The idea or you think it's closed...

It's not like we have not closed it or open. It is -- keep monitoring what is happening in the things. If really opportunity arise, why should we look back and...

Just trying to figure out what is the cost of opening of a new company is high for you to or to new platform.

See there is like -- for any new exchange, if at all anything, there will be some initial costs. You require technology, apart from technology also require a lot of other investment...

settlement guarantee fund so that's why you have to fund also. And it will take time, there will be adaptation for years.

But you will be like -- put the investment right away, and will you wait for that very long? We don't know how many years take to really, one thing really you've look at it.

Are the event days or opportunities earlier question or they are far right now [Indiscernible] typically who want to buy another exchange. So let's say...

See currently, it's not that easy technically. It is like regulations are -- regulatory challenges are there. If you want to be in exchange, you want to take as a stake, you want to take it, you cannot take more than 15%.

This is the only country, I think, where the exchanges are not allowed to buy another exchanges. There is a commodity of 15%, right?

15%, Otherwise, you have to -- totally, [Indiscernible] get margin with this entity. That is...

Look at the other markets of Gujarat -- the exchanges are allowed to have [ 1% upto 100% ].

Regulations have been there.

After that Bimal Jalan Committee.

Bimal Jalan Committee.

Right. Yes, on the -- so proceed test on the new products and new categories, the spot exchanges this brings me to this new categories of investors and middle men, or say brokers. So with the new category of investors, [ BCB ] allowed [ BIEs ] [ foreign public investors ] to the Board has agreed to that one. So they are yet to come out with the regulation -- final regulations, that -- but there -- definitely there is 1 thing really that is -- because for them, it's not like an equity market. One thing we have to look at it is in the equity market, the same company has not traded anywhere else, but same commodity is getting traded everywhere. So what are the opportunities that you see for Indian market is, one, there could be a lot of cost of carry arbitrars kind of things happens within the spot market. That means once they come in, they can really can look at price differential that is there between the spot and futures markets, and between the markets also. Globally, they are already operating in a global market. They can look there and here. And their point of view, their strategies, their thinking, definitely can they can hear. And they may price the products in a different view considering all their research and all those things. So there are certain elements like before I say inter-market arbitrage, then you can look at cash and carry arbitrage. Then if they wanted to have to trade in products which is nowhere available in other countries, there also, they can come and they can...

What are the things you can do from our side to increase the trading once the regulation is in place?

We wanted to make our options. We are driving, in fact, a lot because options is 1 thing. It's really, we have seen good traction and people opted maybe because of various other support regulatory thing, options of [Indiscernible]. Really, we wanted to pick up this one, so that even when they come up, they can look for a lot of combinations between the features, options and all those things. Because they have seen all these products for quite a long time compared to the Indian market. So I think once they come in, I think we see that this will get [ ready ].

Is there any idea about what kind proportion trading [Indiscernible] they have in other emerging markets, something like Malaysia, [Indiscernible].

Commodities are all together a different -- [Indiscernible] is all together -- like Malaysian market is different. But in Indian market, definitely, they can look for some of our non-agricultural commodities really [Indiscernible] but what is the share is very difficult to say that. Whatever happens, we cannot expect that everything will happen in one go. Whatever it will be a progressive approach, gradually it will happen. Because we cannot expect all the participants to come under trade immediately. One after one, they'll come [Indiscernible].

Sir, the mutual funds, are you're seeing some fraction out there?

Currently, their share is very limited, current mutual funds and other things. We -- from our side, we are making efforts what we have recently recommended, AMFI also come out with a separate committee for -- within AMFI for commodities, which is not there. Because we want somebody from AMFI to pick up some issues related to the commodity markets. Like for example, the institutions can hold only for 30 days in case of metals. Physical -- any physical commodity comes to them. They cannot all like in case of gold, they can keep it for 180 days, but not metals. They can keep it. So when you say 30 days only they can hold, virtually if they end up getting a delivery, they cannot even wait so I think that is certain. There are certain aspects really is the bothering the mutual funds. Even the limits, like they cannot go beyond 10% in 1 single commodity. I think catches are there, which is really preventing them not to come in a very big way. But we have been asking the regulator to accommodate certain aspects, so that they can start coming in.

The new brokerage -- the new broker site they can in like [Indiscernible] are they...

Banking, they are doing. That means we have seen good progress from ICICI and Kotak. They're all -- they are doing it. But when you look at this as a percentage to the overall turnover, it may not be roughly around 1,000 compared to out of a total turnover of 25,000. So it percentage-wise, it is not a thing. But it takes some time like what we have seen is whomever they are getting registered, the clients across. Now they are becoming the client across the asset plan. So that is making the investors open to any asset class, which they would like to trade. And again, this market is a derivatives market. It is not ready because somebody is interested in an IPO, that kind of business won't come here. So it is that...

So do you think -- so you're saying only 2 names, ICICI and Kotak.

Then another like the [Indiscernible] and HDFC. And HDFC also is working on some -- their app or something they are working on that one. And there are also some brokers are having some -- especially this bank brokering, they are having some issues related to back office software, okay. So that I think some brokers are working on that. But all -- If you take all the bank broking funds, I think almost everyone is -- they've made an entry into this.

Do you think there has been volume [Indiscernible] essential for these changes? And the related question is that does saving and RBI are taking some measures or to take some majors to improve the in the domestic markets.

RBI already has done for both, I can say -- not both, but other things, but for various reasons, they have done for both. Now it is like today, you would take any entity who is associated with gold, big entities are trading on MCX. Whether it will same thing will happen in other metals and other things, I think we have earlier also made representations to RBI and also for -- we do not see immediately thing, but we are going and meeting the banks, encouraging there. Because many clients or corporates are their clients, is that really like we are saying whenever you are lending and other things because even recent RBS, they come out with a report. In that report also clearly, they have pointed out that commodity risk is a major element to the corporates. While we can able to create awareness and another thing. And that kind of culture is still long wait to happen. That means it can happen over the period of time because they have to look at the book -- both derivatives book as well as the physical books together -- put together and then they have to look at it. That kind of thing is still -- when they see loss, they feel that it is a big loss, but they have to parallelly have to look at the physical markets also. They would have been there. It is a balance between these 2 markets. That is what is hedging is all about.