The Multi Commodity Exchange of India (MCX) is set to launch electricity futures contracts starting Thursday, July 10, 2025. This move comes after receiving approval from the Securities and Exchange Board of India (SEBI) in June 2025. It marks a significant milestone in the development of the energy derivatives market in India.
Electricity has become an essential commodity, and its price volatility is influenced by various factors, such as supply and demand, weather conditions, peak loads, and festive seasons. The introduction of electricity futures contracts aims to provide a transparent, liquid, and reliable hedging mechanism for power generators, distribution companies, large industrial consumers, and financial participants.
MCX believes that this timing is perfect as the electricity sector is witnessing substantial growth. The demand for structured instruments to manage price risks associated with electricity is increasing. The contracts will be available for all twelve months of the year, with three-month contracts available for trading initially, including the current month.
Each trading unit will be 50 megawatt hours (MWh), with prices quoted in Indian Rupees per MWh, excluding taxes and levies. The tick size will be set at ₹1 per MWh. The settlement of these contracts will be based on the volume-weighted average price of the Indian Energy Exchange’s Day Ahead Market for all calendar days of the settlement month.
To ensure market stability, SEBI will implement daily price limits, starting with an initial slab of 6%, which can be extended to 9%. The initial margin requirement will be at least 10%, or based on volatility, whichever is higher. Customer-level position limits will be capped at 300,000 MWh or 5% of the market-wide open interest, whichever is greater.
Praveena Raye, MD and CEO of MCX, stated that electricity is a crucial commodity with price volatility shaped by multiple factors. The launch of electricity futures reaffirms MCX’s commitment to developing innovative products that meet real market needs. This initiative is a step towards deepening India’s energy markets and supporting the broader goal of sustainable, market-based power pricing, which is essential for achieving the vision of a developed India.
The introduction of electricity futures contracts is expected to enhance the trading environment by enabling investors to diversify their portfolios. Commodities trading, including electricity, will allow investors to hedge against price fluctuations and manage risks effectively.
As India continues to grow, the energy sector plays a vital role in the economy. The launch of these futures contracts will provide a platform for better price discovery and risk management, ultimately benefiting consumers and producers alike.
Investors are encouraged to explore this new opportunity in the commodities market as MCX takes a significant step towards modernising India’s energy trading landscape. With the right strategies and tools, participants can navigate the complexities of the market and make informed decisions. The electricity futures contracts are set to open up new avenues for investment and risk management in the energy sector, marking a new era for commodity trading in India.
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