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trading on the MCX and NCDEX

05 Jan 2023

When it comes to commodity trading, the two biggest names are MCX and NCDEX. These are two well-known commodities exchanges in India that play an important part in commodity trading and provide traders with opportunities to profit. Gasoline, food and metals are key commodities in daily living. The price of these goods swings rapidly on the market, having a substantial influence on users.

Commodity trading is gaining popularity as a way to keep track of such movements and assist dealers in making big money from these commodities. Overall, commodities are a long-term approach to diversifying a portfolio beyond standard assets. It is also useful for storing funds amid a turbulent and gloomy stock market.

When it comes to the commodities market, it is the cornerstone of the global trading system, and it enables traders to make a lot of money if done strategically. The commodity exchange is a legal institution that assists in establishing and implementing regulations for conducting commodities exchange in a standardised manner. A commodities exchange is often characterised as a physical location where transactions may take place. Every day, billions of dollars are traded in the commodities market. Online commodity trading does not deliver real goods; instead, they deal in futures contracts in which buyers and sellers agree on a specified price at which the commodity will be sold at a given time.

India now has four commodities exchanges, which are mentioned below:

  • National Multi-Commodity Exchange (NMCE)
  • National Commodity and Derivative Exchange (NCDEX)
  • Indian Commodity Exchange (ICEX)
  • Multi Commodity Exchange (MCX)

In this section, we will compare the MCX and NCDEX stock exchanges and grasp the differences between the two. Before comparing the two markets, learn about the country's two dominant commodities exchanges.

What Is MCX?

MCX, or Multi Commodity Exchange, is a commodity exchange that allows traders to trade in gold, silver, and other precious metals for a high return. Overall, the MCX offers a trading platform for options such as energy,  bullion, non-ferrous metals, and other agricultural commodities.

What Is NCDEX?

NCDEX, or National Commodity & Derivative Exchange Limited, is a multi-commodity trading exchange that enables traders to trade agricultural commodities such as wheat, oil and soybeans. Commodity trading on exchanges allows dealers to maximise their profits while also providing peace of mind to farmers who are often concerned about price swings and loss. It follows the same stock market timetable as the other exchanges, including the MCX.

Similarities Between MCX And NCDEX

  • Both MCX and NCDEX began operations in 2003, with headquarters in Mumbai. Both commodities exchanges utilise cutting-edge technology to help dealers trade more quickly and accurately.
  • Both exchanges are open five days a week, from Monday to Friday. Furthermore, both exchanges provide an online trading platform that is accessible to all members through a Computer-To-Computer Link (CTCL) and trader workstations that are linked by VSAT, VPN, leased lines, and the internet.
  • Both the MCX and the NCDEX deal in conventional contracts. As a result, the commodity quality, lot size and expiration dates are all standardised.
  • Both MCX and NCDEX, like the BSE and NSE, are cleared by the clearing firm, which eliminates counterparty risk. Margin trading is permitted on the MCX and NCDEX, enabling traders to take a greater stake in their money by posting a margin.

What Is The Difference Between MCX And NCDEX?

  • Although both the MCX and the NCDEX are commodity trading platforms, they vary somewhat in terms of the commodities they trade. MCX trades commodities such as silver, gold and other traded metals, but NCDEX gives the highest investment returns through dealing in agricultural goods.
  • Although the primary distinction between the two commodities exchanges is the commodity traded, there are several additional distinctions in terms of promoters and owners, clearing banks, and so on.
  • On the one hand, the NCDEX was founded in April 2003, while the MCX began operations in November 2003. NCDEX is India's sole exchange that is supported by LIC, ICICI Bank Ltd, NABARD, and the NSE.
  • Singapore Mercantile Exchange (SMX), National Spot Exchange Ltd (NSEL), Global Board of Trade (GBOT), Bahrain Financial Institution (BFX) and others support MCX.
  • Aside from that, each exchange has a distinct number of clearing banks. The NCDEX has 15 clearing banks, whereas the MCX has 16 clearing banks.

Wrapping Up

Overall, it is reasonable to infer that since NCDEX and MCX trade in distinct commodities, they cannot be immediately classed or compared against one another. The platform should be determined by the sort of commodity to be traded, not the other way around. Every prudent investor should join both Exchanges to take advantage of a strong market and limit losses when markets are down. Given the current volatility of the global markets, trade should be dispersed across multiple commodities and therefore numerous commodity trading exchanges.

Related Articles: MCX Meaning - Learn What is MCX, Its Advantages, and More | Who Sets the Price of Commodities? | Are Commodities a Good Investment Now? | The Top 3 Commodities and How to Buy Them


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