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Tejas KhodayFYERS Team
Co-Founder & CEO, FYERS
Asked a question 9 months ago

What should MCX change to get you interested in trading commodities?

Join FYERS Community to pick others' brains on Trading/Investing

liquidity for sure.

This answer won 200 Reward Points

1) When it comes to trading in stock market. Common people have so many resources to learn about the functioning of stock market. More over all the basic stuff is available for free on YouTube etc these days. That helps enthusiasts to learn and venture into markets. That is missing with commodities.

2) Commodities are not given importance by news/media. If there's any major development with regarding to any particular stock/index. Major publications/channels cover it on front pages or during their prime time etc. But commodities doesn't get that coverage. Only crude oil and gold is widely tracked. (As per my knowledge)

3) People should talk more, discuss more within their closer communities. Communities where people can learn more or share their knowledge with peers.

4) Advantages & Disadvantages should be publicised. People would like to know the risks and rewards when making an investment or a trading decision. So MCX should try to outreach to traders and explain the advantages and disadvantages of trading on MCX.

5) As of now, the timings for commodities differ from one to another. MCX should think of a way to bring some synchrony or make it clear for traders.

6) Last, but the most important one is volumes. Most of the charts on MCX looks awful, no sign of liquidity or volumes. That should be improved for any retailer to show interest. A few days back there's news that FII's are entering into commodities. But soon after, our government announced suspension of trading in certain commodities for 1 year. Such restrictions or suspensions of trading for long periods also drive away traders. Hoping that after 1 year when FII's enter the commodities, liquidity problem will be resolved.

Main issue with the commodities is liquidity. In the evening session there will be below normal liquidity in the selected scripts like crude oil. But in the morning session there won't be enough liquidity.  

Also commodity options are traded very less and highly illiquid. There is a huge opportunity but no one trades. 

1. MCX can convince SEBI and give 5X more margin. That can help at least to increase the volume.

2. MCX can reduce lot size as Tejas mentioned in the Twitter so that retailers can afford it especially after this new margin rules its difficult to afford.

3. Convince governament to remove STT, and other unnecessary taxes. These taxes were added when there were no capital gain tax. Now they have added LTCG and STCG tax at flat rates STT and other charges has to be removed. Also now trading is completely online there is no point of having these many charges. Same applies in NSE also.

4. Removal of Peak margin penalties. There is no point of having peak marin rule as settlement takes T+1 day for F&O. If they add peak margin rule settlement has to be instant. Otherwise there is no point of having peak margin snapshots and penalties.

I am waiting for commodity market to be more liquid to trade in options. I don't trade in futures. 

 

Let comment any other improvements MCX can make to attract traders. 

  1. Decrease the margin required to trade commodity such as Crude Oil as it was before. MCX should convince SEBI
  2. With less margin required, automatically there will be more traders involved and will result in more liquidity which is lacking now
  3. With high margin requirement now you are forcing whatever traders that are left trading to go for Options rather than Futures which is comparatively safer than Options. Hence, instead of protecting the retail traders you are asking them to take more risks

I think MCX should introduce micro lot of 0.01 or 0.1 in futures in the most liquid commodities like crude and gold to start with and eventually introduce the same in other assets too. 

Reason they should do this is because I have seen a lot of trading journey videos of American Youtubers where they tell that they matured in their trading journey by trading Forex and Commodities because they had the benefit of micro lots trading. 

As per the current scenario, many young kids start trading in NIFTY & BANKNIFTY which are too volatile to start with. Because of the scarcity of capital most youngsters trade in options without considering the risk and having proper education about how options work. If there are mini future lots in Commodity maybe they can trade in them and lose less money and certainly achieve higher accuracy as they could also be traded on higher time frames in Intraday.

Best thing: It will reduce screen time and people will be more interested to do trading as a full time thing.

Thanks!

MCX should give 30 day challenge like Fyers 😜❤️

  1. Decrease lot size which would help increase liquidity
  2. Patterning with Content creators to produce educational content and bring eyeballs

1st Decrease Margin to increase Volume it will help to attract traders.

They should bring down the lot sizes and be more flexible on leverage to encourage more traders, it also helps with the liquidity issue like as you mentioned in the past. 

MCX Should Introduce mini lots in Crude, Natural Gas, Copper, Nickel, Like SilverM and GoldM. OR Reduce Margin in Mega Lots.

Provide Mini Lot Like 100 or 200 Sequence, and Offer Low margin Required in Trading and  also Publishing Video in Youtube for Attracting Traders and build Interest to Trading Mcx.

Trading in MCX is not easy U have paicent both on time and money (cycle subject).

if it can reduce the lot size to affordable & awareness is required. apart from that complications in getting cues from international markets & interpretation of the same, make it complication again to a retail trader