MCX to Launch Electricity Derivatives, Bolstering India's Power Market

MCX has received SEBI approval to launch electricity derivatives, marking a pivotal development in India’s commodities market. These contracts will help stakeholders hedge against price volatility, enhancing market efficiency. This initiative supports renewable energy and reforms, serving as a bridge between physical and financial sectors.

The Multi Commodity Exchange of India (MCX) announced on Friday that it has secured approval from the Securities and Exchange Board of India (SEBI) to launch electricity derivatives. This significant development highlights regulatory commitment to fostering a dynamic and sustainable power market in India.

MCX's new electricity derivatives contracts will provide generators, distribution companies, and large consumers with a robust tool to hedge against price volatility. By introducing these contracts, stakeholders can effectively manage price risks and improve efficiency within the power market, according to Praveena Rai, MD and CEO of MCX.

Rai elaborated that these derivatives offer a reliable, transparent, and regulated platform for managing power price risks, which have intensified due to renewable energy transitions and market-based reforms. As India accelerates its focus on renewable energy and open access power markets, these derivatives stand to connect the physical and financial sectors. Since 2003, MCX has been India's leading commodity derivatives exchange, commanding a 98% market share in commodity futures contracts trading for the fiscal year 2024-25.

(With inputs from agencies.)