MCX Electricity Futures Launch On July 10 — Here’s What It Means for Investors

India’s power market is changing. Starting July 10, 2025, the Multi Commodity Exchange (MCX) will launch trading in electricity futures. SEBI has approved the move. It’s a step toward making electricity pricing more practical and useful for companies, traders, and anyone involved in the energy business.

 

Here’s what you need to know.

What are electricity futures?

Electricity futures are basically contracts. You agree on a price today for electricity that will be delivered in the future. It helps both sides buyers and sellers plan their costs and reduce surprises.

Right now, most of the electricity business in India runs on long-term contracts or spot trades. These don’t always reflect what’s happening in the market. Futures, on the other hand, move with daily price trends. That makes them useful for managing risks that come from changes in demand, fuel costs, or weather.

What’s in the MCX electricity futures contract?

MCX has set up the contract with the Indian market in mind. Here are the basics:

• Lot size: 50 megawatt-hours (MWh)
• Price: Quoted in rupees per MWh (excluding taxes)
• Tick size: ₹1 per MWh
• Contract months: All 12 months, with trading allowed for the current and next three months
• Trading hours: Monday to Friday, 9:00 AM to 11:30 PM (till 11:55 PM during US daylight time)
• Settlement: Cash-settled, using the average price from the Day-Ahead Market on the Indian Energy Exchange (IEX)
• Daily price limit: Starts at 6%, can stretch to 9% as per SEBI rules
• Margin: 10% or based on volatility, whichever is higher
• Position limits: 3 lakh MWh or 5% of total open interest in the market, whichever is more

Why is this happening now?

India’s electricity demand is growing. At the same time, fuel prices are more volatile, and renewables are adding new pressure to manage supply and pricing better. Until now, there hasn’t been a good tool to manage these shifts in the short term.

Electricity futures give companies, distribution firms, and traders a way to lock in prices, protect profits, and cut risk. MCX is launching this ahead of the National Stock Exchange (NSE), which is planning to start its own contracts on July 14. This adds more choice to a market where IEX has mostly handled spot trades.

Who should care?

Power producers: They can set a fixed price for future electricity. That helps them plan cash flow and avoid surprises.

Distribution companies: These firms can hedge against rising prices, which helps them manage budgets better.

Large consumers: Industries with big power bills can lock in costs and avoid short-term price shocks.

Traders and investors: This adds a new market for speculation, arbitrage, or long-term bets.

Policymakers: More transparent pricing can help with better oversight and planning.

How do you trade electricity futures?

Trading works just like other MCX futures. Here’s the process:

• Pick a contract for any of the next four months
• Trade in lots up to 2,500 MWh per order
• All contracts are cash-settled
• Final settlement price is based on the Day-Ahead Market average on IEX
• SEBI’s rules apply for price bands and margin needs

You can trade through any broker who offers MCX access.

What does this mean for the energy sector?

This launch adds a much-needed tool to India’s energy markets. Here’s why it matters:

• Better price signals: Futures reflect market expectations, which helps with long-term planning
• Lower risk: Helps avoid major losses when prices swing sharply
• More stable bills: Discoms and large consumers get more control over their costs
• Cleaner planning: This supports the shift toward solar and wind, which come with their own uncertainties

What’s the catch?

• Most people in the power business haven’t traded futures before. They’ll need time to get used to it.
• SEBI and MCX will have to keep a close watch to make sure the market stays fair and runs smoothly.
• With NSE entering the game soon, traders will compare both exchanges. The one with better liquidity and service will win more users.

Final words

Electricity futures are not just for traders. They are a smart way to bring better planning, less risk, and more clarity to India’s fast-changing power market. If you’re in the business of buying, selling, or managing electricity, it’s worth understanding how these contracts work. 

Source: MCX