MCX saw another sharp fall in trading volumes on Friday, extending the weakness that began earlier in the week. Premium segment activity dropped further compared with Thursday and Wednesday, showing growing stress in the market. Analysts say the Reserve Bank of India’s new bank guarantee rules are the main reason, and the impact is proving heavier than expected.
The rules, effective from July 1, require that bank guarantees used for margin funding must be backed by collateral, with at least half in cash. This has reduced liquidity across capital market firms. The effect is stronger on MCX because its clearing corporation, MCXCCL, depends heavily on bank guarantees. Nearly 60 percent of its margin funding comes from guarantees, far higher than peers such as BSE.
With guarantees restricted, brokers and trading firms face higher funding costs and lower leverage. Arbitrage and market‑making strategies, which rely on easy margin support, are becoming less profitable. The steep fall in MCX volumes highlights the structural weakness created by its reliance on guarantees.
Experts warn that unless new funding options are quickly adopted, MCX may continue to see weak activity. The exchange’s ability to adjust will decide whether volumes recover or remain under pressure in the coming weeks.