Commodity: During Thursday’s evening trade, the December gold contract on the commodities exchange MCX unexpectedly increased by ₹1,133 per 10 gm in just four seconds. Despite a steady dollar-priced gold market, this spike happened.
Between 9:10 and 9:15 p.m., the “unusual” spike in gold prices caused them to reach ₹61,914 per 10 gm, sparking speculation among traders.
Motilal Oswal Financial Services director Kishore Narne speculated that the unexpected spike may have been the result of an “inadvertent” market order to buy rather than a limit order.
The trading engine selects all of the sell-side quotes in a market order and determines the average buy price. This would be significantly more than the client’s intended buy price. Only sell quotes that fell within the client-specified price limit would have been selected in a limit order.
Approximately 150 lots were traded at a price of ₹60,700, and 12 lots (12 kilograms) at ₹61,914. The price quote is per 10 grams, and the contract is for kilograms. The contract is currently trading at about Rs. 61200.0 per 10 gm, having settled at ₹60,722 on Thursday.
“The trade must have been a punching error because it was within the day’s price range. The price would have dropped as quickly as it rose if the client or clients had realized their error right away, according to Narne.
The inexplicable spike, according to the national secretary of the India Bullion and Jewellers Association Surendra Mehta, ought to be looked into by the MCX.
The trade was described as “unusual” by Nitin Kedia of Kedia Fincorp, a commodity advisory firm because there was no “apparent” reason for the sudden and extreme volatility that lasted for a brief period.
It is unrelated to the exchange, as it was not caused by a technical glitch. However, it does prompt questions, given that the dollar rate of gold did not experience such volatility, and the rupee remained stable, commented Kedia.
Contact with senior exchange officials was not possible right away.
On October 16, MCX moved from long-time vendor 63 Moons to the TCS commodity derivatives platform. In the last year, the share price of MCX has nearly doubled, reaching ₹2,902 intraday on Friday. Approximately one-third of the rally took place after the migration. The increase in exchange turnover has also been significantly influenced by the volatility of gold and crude prices.
MCX holds a 95% market share, making it the largest commodity exchange in the nation. It provides trading in energy and metals futures and options. With 15% of the equity, Kotak Mahindra Bank is the main shareholder of the bourse.
