MCX to Launch Electricity Futures to Tackle Power Market Uncertainty

India’s  commodity derivatives exchange, the Multi Commodity Exchange (MCX), is set to debut its electricity futures contracts on July 10.

The launch is aimed at offering market participants, generators, distributors, large consumers, and financial institutions, a robust platform to hedge against the growing volatility in electricity prices.

The product has been developed in response to rising demand for structured and transparent risk management instruments in the energy sector. Electricity prices in India have become increasingly sensitive to variables such as fuel supply constraints, rising demand, seasonal consumption patterns, and regulatory interventions.

MCX’s new contracts will initially include four monthly contracts for July and three for the following months. They will be settled based on spot prices sourced from the Indian Energy Exchange (IEX), which currently holds over 90 percent market share in electricity trading. While IEX remains the dominant player in the segment, MCX’s entry signals a growing competitive environment. Notably, the National Stock Exchange (NSE) is slated to launch its own electricity futures product just four days later, on July 14.

“This contract is a step towards deepening the domestic energy markets and supporting the broader goal of sustainable, market-driven power pricing,” said Praveena Rai, CEO of MCX. “It addresses a critical gap in the market and is designed to meet the evolving needs of India’s power sector," he added.

The contract, which recently received regulatory clearance from SEBI, will follow the standard price band mechanism, starting with a daily price limit of 6 percent, extendable up to 9 percent on high-volatility trading days. The initial margin requirement is set at 10 percent or determined by volatility-based parameters, whichever is higher. Position limits have also been clearly defined: clients can hold up to 3 lakh MWh or 5 percent of total market-wide open interest, whichever is greater.

According to MCX, the futures contract is expected to serve a dual purpose: ensuring more predictable energy costs for stakeholders and contributing to more efficient electricity price discovery at the national level. It also presents a new opportunity for institutional investors to diversify their commodity portfolios with an energy-linked derivative.

“This is not just about launching a new contract,” said Rishi Nathani, Chief Business Development Officer at MCX. “It’s about strengthening India’s energy security and supporting long-term power planning. Whether you're a generator, a discom, or an industrial consumer, this contract helps manage risk with clarity and liquidity," he noted.

The launch comes at a time when India’s electricity demand is witnessing a sharp uptick due to urbanisation, digitalisation, and growing industrial activity. MCX believes its electricity futures product will not only help manage short-term volatility but also play a role in India’s broader transition towards a more market-driven and sustainable power economy..