MCX shares: Additional margin on gold, silver futures withdrawn; what ICICI Sec says

Shares of Multi Commodity Exchange of India Ltd (MCX) jumped 4 per cent in Thursday’s trade as the additional margins of 3 per cent on gold futures and 7 per cent on silver futures were withdrawn with effect from Thursday. ICICI Securities in a fresh note on commodity exchanges said margin changes remain a recurring possibility, especially amidst heightened volatility and a relevant readthrough for such episodes. It sees any adverse regulation and sudden dip in volatility as key risks for commodity exchanges. 

Gold spot prices have declined 10 per cent, while silver spot prices are down by 33 per cent, since the start of February. This had led to an increase in margin requirements for gold and silver futures, the brokerage said.

“Average margin requirement for silver futures increased from 15 per cent earlier to 72 per cent in February while average margin requirement for gold futures increased from 10 per cent earlier to 30 per cent, in February,” ICICI Securities said.

The development, ICICI Securities said, led to 41 per cent month-on-month (MoM) decline in gold futures average daily trading volume (ADTV) to Rs 33,600 crore in February so far and 58 per cent MoM decline in silver futures ADTV to Rs 22,700 crore during the same period. 

“Also, similar to crude options in 2020, percentage premium turnover increased for both gold and silver options in late January 2026 and February 2026,” it said.

ICICI Securities noted that crude futures at MCX had a significant increase in margin requirement when crude oil prices became negative during the Covid period. This led to a sharp fall in futures ADTV from Rs 17,200 crore in February 2020 to Rs 3,300 crore in April 2020. Crude options premium ADTV, on the other hand, saw an increase during this period, as there was an increase in volatility. Percentage premium turnover for crude options increased from 2.2 per cent in February 2020 to 3.9 per cent in March 2020 and 8.3 per cent in April 2020.

“Crude volumes eventually moved to crude options over the next few years in a big way,” it noted.

On Thursday, MCX shares climbed 4.04 per cent to hit a high of Rs 2,435.75.  On whether the prevailing valuation multiples are too high for a commodity exchange such as MCX, ICICI Securities gave an example of Chicago Mercantile Exchange (CME), the largest commodity exchange in the world in terms of futures & options contracts open interest.   

In 2004, CME saw exponential growth in commodity options/futures volume. CME’s options contracts traded increased from 48 million in 2004 to 107 million in 2007, while CME’s futures contracts traded increased from 211 million in 2004 to 432 million in 2007. 

“Trailing P/E multiples also saw an exponential rise from 24.62 times in January 2004 to peak multiples of 49.31 times in November 2006. CME traded at more than 40 times trailing P/E multiple for 24 months between September 2005 and August 2008,” it noted.