MCX gets Sebi approval to launch electricity derivatives

Mumbai: The Multi Commodity Exchange of India (MCX) has received approval from the Securities and Exchange Board of India (Sebi) to launch electricity derivatives, according to a regulatory filing on the BSE.

These contracts—linked to the price of electricity—will allow power generators, distribution companies, and large consumers to hedge against price volatility and manage risks more effectively. “The electricity derivatives contracts will enhance efficiency in the power market,” MCX said in its filing.

The launch marks the resolution of a long-standing jurisdictional tussle over the regulation of electricity derivatives. The matter has been pending since the days of the now-defunct Forward Markets Commission (FMC), which was merged with Sebi in 2015.

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Under current regulatory rules, if electricity derivatives are cash-settled, they fall solely under Sebi’s purview. If the contracts are compulsorily deliverable, regulatory oversight will be shared between Sebi and the Central Electricity Regulatory Commission (CERC).

“These [electricity] contracts will offer participants a reliable, transparent, and regulated platform to manage power price risks, which are becoming more dynamic due to renewables and market-based reforms,” said Praveena Rai, managing director and chief executive of MCX.

Rai added that with India’s growing focus on renewable energy and open access power markets, electricity derivatives could serve as a vital bridge between the physical and financial sectors.

MCX said the move positions it as a “torchbearer of innovation” in commodity trading and supports India’s ambitions for sustainable energy and deeper capital markets. The exchange also called the move a step towards strengthening India’s energy market ecosystem.

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Separately, the National Stock Exchange (NSE) disclosed in its May earnings call that it had received in-principle approval from Sebi to launch electricity derivatives as well.

MCX currently commands around 98% of the commodity futures trading market in terms of value for FY25.