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Market Makers Challenge MCX Monopoly
19 Jan
Summary
- Brokers seek harmonized market-making rules for equity and commodity derivatives.
- Proposal could challenge MCX's near-monopoly in India's commodity market.
- ANMI requested Sebi to extend equity-style market making to commodity derivatives.
Brokers have called on India's securities regulator to implement uniform market-making rules for both equity and commodity derivatives. This significant proposal could disrupt the near-monopoly held by the Multi Commodity Exchange (MCX) in the commodity derivatives sector. The Association of National Exchanges Members of India (ANMI) officially requested the Securities and Exchange Board of India (Sebi) to extend equity-style market making to commodity derivatives.
Currently, exchanges can offer market-making incentives for stocks, even if they are already liquid on other bourses. However, this facility is restricted for commodity contracts already active on another exchange, unless that exchange also offers the same incentive. ANMI argues that extending these incentives would promote inter-exchange competition and deepen market liquidity for investor benefit, especially under the unified exchange license framework.
This move aims to increase competition and liquidity in the commodity derivatives market, where MCX currently holds a 99% market share. Sebi's consideration of this proposal, particularly in light of its chairman's comments on deepening the non-farm commodity derivatives segment, could usher in a new era of competition, potentially benefiting market participants through tighter bid-ask spreads and optimized returns.
