Quick Summary: MCX will launch its Electricity Futures Contract on July 10, 2025, following SEBI’s approval. The contract aims to provide a reliable hedging tool for power sector participants amid rising electricity demand and price volatility. It will be traded in units of 50 MWh, settled in cash based on IEX’s Day Ahead Market prices, and available for all 12 months, with trading open for the current and next three months. The initiative supports structured electricity price risk management and marks a significant step in deepening India’s energy derivatives market.
Full Article: The Multi Commodity Exchange of India Ltd. (MCX), India’s premier Commodity Derivatives Exchange and the world’s largest Commodity Options Exchange (FIA, 2024), has received approval from SEBI to introduce electricity derivatives. MCX will officially launch the Electricity Futures Contract on Thursday, July 10, 2025, marking a key development in India’s energy derivatives landscape.
This introduction comes at a time when the electricity sector is undergoing substantial growth and facing challenges related to price volatility, shifting demand, and fuel cost fluctuations. The new contract is designed to offer a transparent, liquid, and effective risk management tool for power producers, distribution companies, large-scale consumers, and financial market participants. It also provides investors an opportunity to diversify into an emerging commodity segment.
The Electricity Futures Contract is structured to address the increasing need for formal mechanisms to manage electricity price risk. Contracts will be listed for all 12 calendar months, with trading initially available for the current and next three months. The trading unit is set at 50 megawatt-hours (MWh) and will be quoted in Indian Rupees per MWh, excluding applicable taxes and levies. The tick size is ₹1 per MWh. Settlement will be cash-based, using the Volume Weighted Average Unconstrained Market Clearing Price (UMCP) of the Day Ahead Market (DAM) on the Indian Energy Exchange (IEX) for all days in the expiry month.
To maintain price stability, the contract will follow SEBI’s Daily Price Limits (DPL), beginning with a 6% band that can be extended to 9% on a given trading day. The initial margin requirement will be 10% or VaR-based, depending on which is higher. Client-level position limits are set at 3 lakh MWh or 5% of the market-wide open interest, whichever is greater.
Commenting on the launch, Ms. Praveena Rai, MD & CEO of MCX, noted that electricity pricing is influenced by several variables, including seasonal demand, industrial and residential consumption patterns, and festive loads. She emphasized that the launch of this contract reinforces MCX’s focus on developing practical, market-responsive products. According to her, the initiative is a step towards expanding India’s energy markets and supporting the broader transition to market-based power pricing, aligned with the vision of Viksit Bharat.