Your complete guide to trading on the Multi Commodity Exchange — from opening an account to understanding margins, settlement, and taxation.
The Multi Commodity Exchange of India (MCX) is India's largest commodity derivatives exchange, established in 2003 and regulated by SEBI (since 2015, when FMC merged with SEBI). MCX offers futures and options trading in bullion, energy, base metals, and select agricultural commodities.
MCX handles average daily turnover of Rs 30,000-50,000 crores across all commodity contracts. Gold, crude oil, and silver are the three most traded contracts, together accounting for 80%+ of total turnover. The exchange provides electronic trading, clearing, and settlement services with robust risk management systems.
MCX is unique among Indian exchanges because of its extended trading hours (9 AM to 11:30 PM), allowing Indian traders to participate in price discovery driven by US and European market movements. This makes it the preferred exchange for traders who want to react to global events in real-time.
To trade on MCX, you need a commodity trading account with a SEBI-registered broker who is an MCX member. Here is the step-by-step process:
Select a broker offering MCX access. Most major discount brokers (Zerodha, Angel One, Upstox, IIFL) offer commodity trading. Check brokerage charges, platform quality, and margin policies.
PAN card, Aadhaar card, bank proof (cancelled cheque or statement), income proof (ITR or salary slips for higher margin limits), and passport-size photographs. E-KYC via Aadhaar is available.
After KYC verification (2-5 days for online, longer for offline), you receive a unique commodity client code. Fund your account via bank transfer. Minimum deposit: Rs 10,000-25,000 depending on broker.
If you already have an equity trading account, request commodity segment activation. Most brokers offer this online — just fill a form and sign digitally. Takes 1-2 business days.
For commodity F&O trading, SEBI requires income proof if your annual income is below Rs 10 lakhs. This determines your margin limit. Higher income proof = higher margin limit = ability to trade larger positions.
Submit your latest ITR or 6-month bank statement showing adequate income. Without income proof, your broker may restrict you to smaller positions.
SPAN Margin: Calculated using Standard Portfolio Analysis of Risk model. Covers the worst-case one-day loss scenario based on 16 different price and volatility scenarios.
Exposure Margin: Additional margin over SPAN, typically 3-5% of contract value. Acts as a buffer for extreme moves beyond SPAN coverage.
Delivery Margin: Additional margin (25-50% of contract value) levied in the last 4-5 days before expiry for physically-settled contracts.
Margin Update: Margins are revised by the exchange multiple times daily. During high-volatility events, MCX can increase margins intraday with immediate effect.
SPAN: 4-5%. Exposure: 1-2%. Total: ~5-7% of contract value. Gold 1kg lot at Rs 72 lakhs needs ~Rs 4-5 lakhs. Gold Mini needs ~Rs 40,000-50,000.
SPAN: 6-8%. Exposure: 2-3%. Total: ~8-11%. At Rs 6 lakh contract value, margin is ~Rs 50,000-65,000. Spikes during OPEC events.
SPAN: 8-12%. Exposure: 3-5%. Total: ~12-17%. At Rs 2.9 lakh contract value, margin is ~Rs 35,000-50,000. Can double during winter volatility.
SPAN: 5-7%. Exposure: 2-3%. Total: ~7-10%. Silver 30kg lot at Rs 27 lakhs needs ~Rs 2-2.7 lakhs. Silver Mini needs ~Rs 35,000-45,000.
Opening prices set based on international market moves. Lower volume compared to evening. Domestic news and RBI policies impact prices. Good for agricultural commodities.
Peak volume hours. Overlaps with US markets (COMEX, NYMEX). US economic data releases (Non-Farm Payrolls, CPI, EIA) cause major moves. 70-80% of gold/crude volume occurs here.
During US Daylight Saving Time (March to November), MCX extends trading to 11:55 PM IST instead of 11:30 PM. This aligns MCX close with COMEX close in the US.
MCX has a pre-open session from 8:55 AM to 9:00 AM for order entry (no matching). Orders accumulate and are matched at 9:00 AM opening. Use limit orders to avoid poor fills at open.
MCX implements circuit limits (price bands) to prevent extreme price moves. These limits are set as a percentage of the previous day's closing price.
Initial Limit: Typically 3-4% for bullion and energy, 4-6% for base metals
Extended Limit: If the initial limit is hit, MCX conducts a 15-minute cooling-off period, then extends the limit by another 3-4%
Final Limit: After the second extension, the limit is widened to 9-12% (commodity-specific)
Special Margin: Additional margins are levied when circuit limits are approached
Important: Unlike equities, commodity circuit limits can be extended multiple times in a single session
Flat Rs 20 per executed order (regardless of lot size or value). Most popular among retail traders. Examples: Zerodha, Angel One, Upstox, Groww.
Percentage-based brokerage: 0.01-0.05% of turnover. Higher cost but includes research, advisory, and dedicated relationship managers. Examples: IIFL, Motilal Oswal, ICICI Direct.
MCX charges transaction fees: typically Rs 2-5 per lakh of turnover. These are in addition to brokerage. SEBI regulatory charges also apply (Rs 10 per crore).
Stamp duty on commodity futures: 0.002% on buy side. On commodity options: 0.003% on buy side. Varies slightly by state but is standardized for most practical purposes.
Successful commodity trading requires tracking multiple international data sources. Here are the key sources every MCX trader should monitor:
Primary reference for gold and silver. COMEX gold and silver futures set the global benchmark. MCX prices follow COMEX with USD/INR adjustment.
Reference for crude oil (WTI) and natural gas (Henry Hub). NYMEX settlement prices directly influence MCX crude and nat gas opening prices.
Benchmark for base metals: copper, zinc, aluminium, lead, nickel. LME official prices (set at 12:30 PM London time / 5:00 PM IST) drive MCX base metal prices.
EIA weekly crude inventory (Wednesday 8 PM IST) and natural gas storage (Thursday 8 PM IST). API crude inventory (Tuesday 10 PM IST) serves as an early indicator.
CTT (Commodity Transaction Tax): 0.01% on sell side for non-agricultural commodity futures. 0.05% on sell side for commodity options (on premium). Similar to STT on equity derivatives.
GST: 18% on brokerage and transaction charges. Not on the commodity itself.
Income Tax: Commodity trading profits are treated as business income (speculative or non-speculative based on delivery). Non-speculative business income for F&O trading — taxed at your income tax slab rate.
Audit Requirement: Tax audit under Section 44AB mandatory if commodity trading turnover exceeds Rs 10 crores (or Rs 2 crores if cash receipts exceed 5% of turnover). Turnover is calculated as absolute sum of profit and loss per trade.
Loss Set-Off: Non-speculative business losses from commodity F&O can be set off against any business income. Carried forward for 8 years. Cannot be set off against salary income.
Commodity trading does not require a demat account. You only need a trading account with commodity segment activation. Demat is needed only for equity delivery trades. Just activate the commodity segment on your existing trading account.
Commodity F&O losses are non-speculative business losses that can be set off against other business income and carried forward for 8 years. File ITR-3 and declare commodity trading as business income to claim loss benefits.
MCX has been regulated by SEBI since 2015 (when FMC merged with SEBI). It follows the same regulatory framework as NSE and BSE for derivatives. Client funds are protected through settlement guarantee fund. MCX is a SEBI-regulated exchange with robust risk management.
Physical delivery only happens if you hold futures positions past the delivery period without squaring off. Options are always cash-settled. Most brokers auto-square off positions before delivery period. Simply square off positions before the delivery period begins (4-5 days before expiry).
Open your Demat account today and take the first step towards mastering the stock market.
Click Here to Get Started