Two exchanges, namely NCDEX (National Commodity & Derivatives Exchange) and MCX (Multi Commodity Exchange of India), dominate India's commodity derivatives market. Both NCDEX and MCX fall under the regulation of SEBI, but there are many differences between them, such as the types of products sold through the exchanges; who or what types of investors trade through them; how much liquidity exists with each exchange; and how each exchange fits strategically into the economy of India. Comparison of the two exchanges shows both their complementary nature and how they compete within the commodity ecosystem in India.
Overview of NCDEX and MCX
NCDEX, the leading exchange in agricultural commodity derivatives, was established in 2003 to provide transparency, efficient price discovery and risk management to the vast agricultural sector of India. The exchange offers a variety of agricultural products including soybeans, chana, mustard seed, guar, turmeric, jeera and a variety of other commodities produced on farms.
MCX launched in the same year as NCDEX and has a primary focus on non-agricultural commodities, particularly gold and silver (precious metals) and base metals and energy products (i.e. Crude Oil & Natural Gas) but has the largest share of total volume of trade in commodity derivatives in India.
Product Portfolio Comparison
The most significant difference between NCDEX and MCX lies in their commodity segmentation
- NCDEX: Agricultural Commodities represent the predominate offering on this exchange platform because of their seasonal characteristics and reliance on supply chain dependencies and monsoon weather patterns, as well as government policy
- MCX: The predominant products of Metals and Energy Products are internationally traded, price benchmarked, and impacted by fluctuations in the global economy.
This difference impacts liquidity, volatility, and trader participation across the two exchanges.
Liquidity and Trading Volume
Liquidity is a major differentiator in this peer comparison:
- MCX has seen high volume traded across all product lines primarily due to the large amount of retail trader, hedger, institutional, and proprietary trading firm activity. Of the three major categories of commodity derivatives traded in India, gold, silver, and crude oil are among the most actively traded.
- While NCDEX has a significantly lower volume of traded products, the volume of trades has been negatively affected by agricultural policy interventions, which have led to multiple suspensions of futures contracts and limited participation by large institutional investors.
As a result, the difference between the two exchanges can be seen in that MCX typically has a tighter bid-ask spread and a greater level of execution efficiency, while NCDEX is more focused on the specific needs of an agricultural commodity.
- The participants in NCDEX are primarily farmers, Farmer Producer Organisations, agriculture traders/processors/exporters and corporates in agriculture; however, there are some limited retail participants.
- The participants in MCX consist of a wider participant base that includes retail traders, commodity arbitrageurs and hedgers as well as institutional players and commodity fund managers, etc.
MCX’s participant diversity directly contributes to its stronger liquidity profile.
Regulatory Sensitivity and Policy Impact
NCDEX is very much affected by government intervention (e.g., stock limits, export bans), and therefore the sudden introduction of new regulations can have a significant effect on how long a contract continues to exist and how much volume there will be traded.
The impact of domestic policy shocks on the MCX is less than that on the NCDEX because most MCX commodities are tied to the global marketplace; as a result, price discovery for these products takes place primarily through internationally recognized benchmarks.
Technology and Market Infrastructure
Both exchanges operate on modern electronic trading platforms with robust risk management systems. However:
- MCX has invested heavily in technology upgrades, disaster recovery, and high-frequency trading compatibility.
- NCDEX focuses more on delivery-based contracts, warehousing integration, and alignment with agri supply chains.
Strategic Role in the Indian Economy
- The NCDEX (National Commodity & Derivatives) Exchange will enhance India's Agricultural Supply Chain by assuring Farmers and Agribusiness have access to price transparency, enabling them to mitigate their exposure to extreme swings in commodity prices.
- The MCX (Multi Commodity Exchange of India) will help develop an efficient Financial Trading Marketplace by facilitating Hedging options to Businesses using Metal and Energy products.
These exchanges do not directly compete with one another. Instead, they each provide a unique and complementary benefit to the economy.
NCDEX Future Expansion plan
NCDEX, primarily a commodity exchange, is set to diversify its portfolio by entering the mutual funds, equity and equity derivatives markets. With all regulatory approvals in place and a fund raise of ₹770 crore, the exchange plans a phased rollout starting next financial year.
National Commodity and Derivatives Exchange (NCDEX) is preparing to roll out mutual funds, equities and associated derivatives by 2026. The transition marks a shift from its commodity centric offerings towards a broader financial services platform.
NCDEX recently raised approximately ₹770 crore from both domestic and international investors through a preferential share issue. These funds are earmarked for developing infrastructure and technology for the new business lines.
The exchange has started hiring and plans to onboard 150 professionals this year. Technology vendor finalisation is underway for the mutual fund and equity systems.
Future Outlook
MCX is likely to retain its leading position in the Indian commodity derivatives landscape, boosted by increasing retail trading activity, increased price fluctuations in global commodities and the increasing trend toward financial products based on commodities. The future growth of NCDEX will depend on the continuing support of a stable regulatory environment, increasing farmer engagement within the marketplace, and greater integration of NCDEX with spot markets and agricultural reform initiatives.
Conclusion
Overall, this comparison between NCDEX and MCX presents two exchanges that serve unique and distinguishing purposes within the broader commodity marketplace. In addition to their differences in size, liquidity and profitability, their complementary roles together form the fundamental framework that supports price discovery, hedging and risk management, and ultimately promotes the economic health and stability of India’s agricultural sector and agricultural commodities marketplace.