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Multi Commodity Exchange of India Ltd
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Ladies and gentlemen, good day, and welcome to the Multi Commodity Exchange of India Q1 FY '24 Earnings Conference. Joining us on the call are Mr. P.S. Reddy, Managing Director and Chief Executive Officer, MCX; Mr. Manoj Jain, Chief Operating Officer, MCX; Mr. Satyajeet Bolar, Chief Financial Officer, MCX; and Mr. Praveen DG, Chief Risk Officer, MCX.
[Operator Instructions] I now hand the conference over to Mr. P.S. Reddy, MD and CEO, MCX. Thank you, and over to you, sir.
Yes. Good evening, everybody. Thank you for once again assembling for this investor call. This evening on Saturday, we have presented our results. As you have seen, the top line is the operating income has increased substantially high. In fact, the kind of growth we have seen is one of the highest since the CTT was imposed in 2013 around that time. So the top line has been doing very well as a company. Our turnover or increasing option volumes have been increasing and the business is doing well. But unfortunately, it could not be trickled down to the bottom line due to hefty costs on technology. You -- again, I must say that I'm disappointed that we couldn't make the CDP project go live as we have been eagerly waiting for.
Of course, there are a variety of reasons. One is that the necessary compliances could not be completed, including audits in a manner that is expected as per the whatever extent guidelines. And some stakeholders have decided some more time, and unfortunately, while we are doing mock toward the end, some mock sessions were canceled due to a long time taken by the EOD/BOD processes. So the trading could not be started next day, the mock sessions by 9:00, as it happens when we go live. So some of these things have dampened the process of going live. And nevertheless, we are working on it. So we should be able to make it live at this time. Again, I'm optimistic about going live. That is the reason I'm making this statement. As I said, I myself is disappointed for not being able to go live in the last quarter. Having said this the results, if you've seen the ADT has increased in options by 26% to INR 83,341 crores compared to the turnover in Q4. The traded clients in F&O saw a growth of 12%, almost around 3.9 lakhs during Q1 versus 3.52 lakh clients. So these are all unique clients when I say that clients, then they are all unique. So that is something the EBITDA margins on consolidated also 19% for Q1 as against 14% for the Q4 of the last year. But as I said, our technology costs have [indiscernible] all are nullified I would say, the efforts that we have made to compete to grow. And I think with these words, I will keep it open for question and answers to the members to the investors. Thank you.
[Operator Instructions]
Our first question is from the line of Devesh Agarwal from IIFL Securities.
The first question is around CDP. If you could share more details, you [indiscernible] upon broader things. But what exactly happened because you were doing a lot of mocks and you are pretty confident about the migration. So is it something that came up in the mocks that has derailed the transition last time. And over the last 1 month, we haven't done any more mocks.
So what was the status of the mock and when are we going to restart the mocks and the likely time lines to migrate to the new platform? Would it wait till December or endeavor is to do it earlier?
See, our endeavor is to do it early. So definitely early. There's no doubt about it. What has happened in the last, why has been, what you call, a derail or what are the reason that we couldn't go live. And what we are doing it is the -- yes, we did find in the mocks some observations and that the -- that's why the EOD/BOD were taking more time. And we need to start the trading, obviously, the next day by 9:00 in the live production, and we have to continue till 11:30 and 12:00 in the night. So the window available is we have to get ready system by 6:00 in the morning. So that we have not noticed consistently happening.
So that is very important for us that we see good amount of stability out on that. If there is any problem in the EOD/BOD, obviously, we can -- we have the systems to verify what is going wrong and then fix it. But that fixing is taking some time, that's why these kind of things are taken some time. But now what we have been doing for the last 1 month is while those are fixed, we are doing our internal mock, not that it has not been done. We are not exposed to the member brokers. And I think in the month of August, we will plan out the mocks for member brokers. This is one part of it. The second part of it is certain audits have to be commenced only after certain tests are done. It's not a parallel activity. Earlier, we planned it as a parallel activity, but now we are doing it sequentially. So that sequential thing is also being done. So that is the other reason why we have not exposed the systems to the member focus. Then we -- as I said, we are not waiting for the December to come. I think we should target to go early live.
But just to understand, sir, any time lines that you can share, given that SEBI has been really expensive that no contracts now would be allowed or approved post December. So they, I think, did not allow the [indiscernible]. And in a nothing will be announced that is what my understanding says. So would that put a [indiscernible] targeting like October or come there to migrate to the new platform?
The way that I put it is -- anyway, we are getting approvals and when we are getting approvals, we are issuing a new contract. That's one part of it. The second part of it is that the -- we are not looking at December, as I said, we would like to go early, it could be even September, it would be even October. But I mean that's not our target at all. We want to do it as early as possible. As I said, we were almost all there at the end of last month. So we shouldn't take much time for us to get a control of the situation.
Right, sir. And sir, we saw that MCX Clearing Corporation had come up with an RFP for some real-time and margin calculation software. Could you share some details around that? And why is this not part of our TCS platform? And why are we raising a separate RFP for this?
See, TCS has been working much the same where current system is based on the span of our CME software. And that is a part of the integral part of the system anyway. But some of the exchanges are doing a faster risk management by reducing the, what we call, turnaround time for the risk competition from whatever the milliseconds that they are having or microseconds. So whatever that they are having it. So the -- some of the, what you call, custom-made systems were based in India, I think they are going to maybe develop such kind of system where we can further reduce the latencies. And if you see the span was used maybe in good old days online, but in CME itself doesn't use it is what I was told. It is maybe batch processing what it does, but not the online real time. So it should be -- it's tailored made for that kind of designed for that kind of batch processing. But what we wanted to do is to more online as our volumes increase, obviously, risk has to be mitigated much faster than what it is today. So there's no immediate requirement. It's kind of what we call a development issue. That's what it is.
Right, sir. And last one from my side. What was the option segment revenues for the quarter?
For the quarter, around 53% of our transaction charges was excluded from options as compared to 49% in March quarter.
And sir, what are the total transaction charges in the quarter?
Total transaction charges was INR 121 crores.
Our next question is from the line of Mr. Prayesh Jain from Motilal Oswal.
Just continuing on the question on the software transition. So you mentioned that earlier you're thinking of doing now audit parallelly, now it's going to be sequential. So is this a change in the sense that now that we have more time, so do you want to do it? Or is it a statutory requirement that we have changed this? And so what is the exact reason for changing the methodology of doing this?
Well, it is not changing the matter of methodology. Earlier, we wanted to, given the time available, we wanted to do many activities simultaneously. And I think even now, we are almost all there, that's why we wanted to do it sequentially so that be should be -- we are able to expose the stable system to the auditors. That is the way it is.
Okay. Could you outline some time lines in the sense that what should we be the watching from MCX with regards to this transition in the sense. What -- when -- what would be the stage the first stages mocks getting successful -- 100% successful, what stage this would start, so could you give some time lines for us so that we can be aware of these things and that gives us more confidence that the transition is on schedule.
See, I don't think we will be able to give out the plan that we have, of course, submitted to, I mean, presented the Board as well as to the others and the regulators also we have given, but then I don't think this is proper for me to disclose it when we have not disclosed to anybody.
Okay. So coming to the volumes now. So do you think that the FPI, which were allowed now to trade would -- earlier you were saying that the software transition would be a key to onboarding FPIs, does that kind of derail this further and FPIs will wait another 6 months to onboard? Or there is an increased traction of FPIs onboarding right now?
FPIs already started trading on the Exchange platform and the volumes are month-after-month are increasing. That is what our observation is.
Could you share some statistics as to what is the number of -- what is -- what are the number of FPIs and what are the volumes coming in from them.
Well, in comparison to whatever the top line -- I mean, the number of options traded or features, it may be not so much significant. But I think we will hit that kind of number, what our one is looking forward. But I will not be able to disclose. We have not disclosed it to publicly. That's what it is.
No problem. And last question from my side. In spite of the launch of many contracts, we've not seen any major jump in our many major volumes coming in on the future side, how do you -- how should we kind of see the future volumes panning out from here?
Well, I see, almost all maybe all these mini contracts on the whole, maybe they were 2 lakh investors are there. In various contracts, of course, that number varies from 1 mini contract to another mini contract. They all have to again get onboarded. That's one important thing. So it is happening. There is a growth in the numbers, but all of them have not come back as yet. That's for sure. And that is where our efforts are going in at this point in time. And to make this mini contracts vibrant, maybe it should again come back to contributing about 20%, 25% of the total volume of the -- that particular product.
Okay. Just was give to one more last one. What are the number of used to see that we had in the quarter and at the end of the quarter in terms of retail investors.
We had 3.93 lakhs during Q1, this quarter ended now, as against 3.52 lakhs of the last quarter traded.
Our next question is from the line of [indiscernible] Shah from Dinero Capital.
So my first question is regarding options turnover. So what are your expectations for options turnover in FY '24? What number do you think we'll end the year at?
I think it is forward-looking statement kind of thing. I don't think it is appropriate for me to make any such this one. All that I can say is the trend is it is increasing. That is the way anybody can make an analysis of. And once our migration is completed, probably we look forward to introducing other option contracts as well. So we would like that portfolio to grow and we expect doing a reasonable growth in that.
Okay, so, second question. So for how long can we continue to see the cannibalization of futures turnover, which as you've seen that options turnover have growing significantly, but some of the futures turnover has gotten cannibalized. So how long can you see this trend continue?
Well, you call it as cannibalization, but I have not been accepting this. The simple reason that the futures hedges also require -- or the option guy was our option writers need also futures contract to protect their exposure. But having said that, I must also say that the -- even if we introduce more and more futures contracts also in other products, if the turnovers will increase. Secondly, that a lot of retail investors are interested in the options because the margins are less. In futures, for example, crude oil futures, it will be almost all 30% -- 40%, it's not a small number. And that's why they are disrupting maybe these counters. That doesn't mean that the genuine one is not there.
Okay. Sir, then what would be the reason for turnover growth in the last 3 years in the future side?
No, well you see, I think we are I would say heterogeneous time periods, we are comparing, while you said that, that continuous 3 years different regulatory changes have caused different ways of this one, peak margin is one reason why the last -- I mean maybe year '19 or 2021 had impacted badly. Subsequently, our options contract picked up, of course, that it may be offshoot of peak margin regulated regime. And the -- so options are compensating this. From the revenue point of view, I think we are not worse off. As long as the option contracts grow much faster than the loss in futures. In terms of contribution to the revenue, I think that should be welcome. Of course, I'm not saying for a moment we should lose our futures. But yes, that's the way trend is happening at this point in time.
Okay. And one last question, if I can put in. So I just wanted to understand how revenues come in from options premiums. So if you can just explain in a little bit detail how revenues flow in from option premiums. So does it change for at the money out of the money strikes? Or how exactly does it work here?
We have what you call only 2 slabs, options, okay? -- up to INR 5 crores premium, it is INR 50 and more than INR 5 crores premium, it is INR 40, only 2 slabs. Now the premium itself is a market determined variable and whether it be at the money or in the money, maybe in the money will be more but at the money may be relatively less. And if it is out of the money, it will be still less, so it all depends on where it is getting traded. But my sense is that many of the contracts are either getting traded at the money or maybe in the money, that's the way it is. And the options turnover is, as I said, is -- yes, please explain what.
Options turnover for the quarter was INR 61,433 crores which is a 35% increase over the previous quarter, with premium was INR 1,230 crores as against INR 989 crores in the March quarter.
Okay. So sir, I just wanted to understand that revenue as a percent of premium, like how does that -- how does that move with respect to if the number of contracts out of the money increase. So how does that change? How does that percentage change?
Well, if more contracts are traded out of the money, the premium will be less accordingly, the revenue will be less.
Revenue would also be less, correct?
Yes.
Okay. That's all from my side.
Our next question is from [indiscernible] from Girik Capital.
Am I audible? Hello? So 2 questions. First on the tech transfer again. How much CapEx we have spent so far until January. And following up on that, given the delays, are there any cost overrun versus what we have planned earlier? You have not disclosed the total cost you are going to spend on this migration. But are there incrementally any cost over and because of these delays, if you can say, payout to TCS?
You see -- I mean payout to TCS will be as per the contract okay? Whatever the -- there's no increase or anything. And because of the delays the cost that will go up is the licensing cost of the third-party licenses, maybe that is applications, some of them we use it. So that we have to renew it, isn't it because we are running mocks and other things. So that -- that may be the additional cost that we'll be incurring.
Are we capitalizing those licensing costs currently?
Currently until we go live, it will be capitalized. And once we go live, then it will be taken to the revenue.
How much we have spent so far between March to June.
I think that's not a public number, I suppose that's not appropriate.
Sir, it's -- given that the shareholders have been waiting for these transitions for quite some time now, and there have been recurring delays, it should be very prudent and transparent from the management front that it provides some clarity on the cost companies would like to incur because on the OpEx side, we have already -- will start leaning out from next quarter from INR 80 crores to INR 125-odd crores quarterly. Transparency should be there, at least given the patients [indiscernible] keeping.
No, no, I understand. I understand. I appreciate that point. What we can do is maybe next quarter, we can add it in our disclosures, that is better for us.
Second question I had was on the -- any optionality we still have on buying out 63 Moons software. If this -- as a plan if this doesn't work out the way we are planning currently.
See, I do not want to dwell on things which are not in my control, okay? And we have to make it happen. That's the way it is. That is what the depreciation is. Unfortunately, again, I myself is dissatisfied for what -- why we couldn't go live. But I don't think we are looking at any other option other than going live. That's the way it is.
Okay. The depreciation rate was lower, just a couple of book keeping. The depreciation rate was sequentially lower and if I do the math on the other operating income as a percentage of transaction revenue that also sequentially declined from 25% to 20%. So anything to call out for?
See, on the depreciation, I'd like to clarify that in the last quarter, we had bought certain equipment, which [indiscernible] poilicy is less than INR 1 lakh right? So what we did is we capitalized it and we fully depreciated it. So that if we don't depreciate it, then if you charge it directly to the P&L, then it gets disallowed in the tax audit. I give the benefit of that, so we capitalize that and then fully depreciate it. That's why there's a variance from March to this June.
Okay. And on the other operating income, as a proportion of transaction revenue seems to decline from 25% to 20%.
That is because your base has increased. So operating income transaction charges has increased while the others are more or less constant.
But nothing -- anything to call out -- it's just a normal days increase in...
Our next question is from the line of Lavanya Tottala from UBS.
Am I audible, sir?
Yes.
So just wanted to check on the RFP, which was released by Clearing Corporation. So wouldn't we have an option to add any additional requirements such as the use to the Infosys or sorry, TCS project which is going on?
See, at this point in time, our focus is only to work with the existing functionality requirements that are required for go live. Now we don't want to give them additional work and then try to manage the -- that another component as well. So that is one part of it. The Second, the CCL being a separate entity and they would help manage the [indiscernible] independently. And this comes under their risk management module. And they would like to have this separate module and then interface with the TCS system so that the risk is computed. I mean the margins are computed much faster than what it is provided for and then secure the markets accordingly.
Okay. So going ahead for any additional feature that we are Clearing Corporation would do one. So would we be asking TCS to add or will be floating an RFP for each of the new features or any addition that we want to do the existing feature. How will that go.
Yes. If it's a core engine, a core system, then obviously, we have to go to them. But if it is a module, which can be separately develop, then that can be done separately. But I mean, the way that we have designed it that using the APIs, we can extract the data and then manage the requirements as we need it. So probably if -- unless it is touching their core engine, core engine means not just matching but the core components of the TCS system, we would like to develop it ourselves.
You mean in-house or...
Yes. In-house, are you may hiring the resources and then development. That's the way it was thought of at that time.
Okay. Okay. Got it. And on the option contracts, so I think we have launched a few -- I mean, new options on bullion related to the Mini contracts also, which was helping bullion volume for options. So this is the one which has reduced the premium for bullion products on options. So this is the same scenario that we wanted to address through bi-monthly contracts on bullion, right? So do we expect more traction in these options once those new products are launched? Or how do you see that?
Well, options are not available on all bullion contracts, although there are features in a smaller denomination, but options are not available on every contract. But as you have seen in the equity markets, weekly options is popular. And maybe fortnightly, we can look at it -- that's the way we are looking at them. One is the value of the contract itself will go down. Second, the tenure of the contract is also reduced. So both ways, it will be reducing the cost to the investors. That's the way, it is.
Okay. Got it. One last question from my side. So on the software thing, last month, when we tried the audit process, you mentioned that audit will take somewhere around 2 to 3 weeks. So now we are planning to do it sequentially, but the audit process most likely should take the same amount of time, right?
Yes, it should take about 3 weeks, 3 weeks, that's right.
Okay. So why was we not sure about the audit procedure earlier? And how is it different now?
No, it was audit -- not sure about it. I mean, we didn't expect so many problems to crop up, especially EOD/BOD issues. And obviously, auditor would like to audit a system, which is free off all those issues. So that is the issue.
So can you specific EOD/BOD issue like creating the making it ready or can you help us understand what were the specific EOD/BOD issues?
No, EOD/BOD calculate several files I mean, calculate several obligations, margins, maybe some file processing and then gives to the members what their obligations are. Next day morning, it will prepare the system. Okay. So there are so many batch processes, which are some are parallel, which are sequential. Now there are pre-EOD checks that we have kept, so unless those pre-EOD are all satisfied, system doesn't move. So if there is a problem in the pre-EOD check it didn't match, then they have to step in and then verify and then fix that and then move on. So these are the -- not just one activity, there's a huge scheduler, which does all these kind of activities. So that is taking some time. That time is being processing time, 5 generation time. They're all getting reduced now. And we want the system to be available for the member brokers to next day morning by 6 -- 6:30, then we are sure of going live -- I mean starting the trading by 9:00. So that is where the time taken for processing is the -- was the worry.
In last one month, could we reduce the time with our internal testing and all because more testing was not happening with just internal testing, which has come down?
Yes, it has. It did.
Our next question is from the line of Sanketh Godha from Avendus Spark.
Just a few data-keeping questions. One is on what was the margin money income earned in the quarter? And second is how much is cash on the books. And if you can give the split of that into where it has been invested and likely yield basically.
The margins that are collected by a Clearing Corporation are invested as per SEBI guidance, so they can only invest in overnight liquid schemes or...
No, sir, I was referring to, first of all, the interest income on the margin money for the quarter? And second, your own cash, treasury cash, which is sitting on the books or how it has been split and what is the yield we are earning there?
So the margin money as on 31st March was INR 1,000 crores, and the Clearing Corporation has earned INR 14.67 crores on it at as a yield of INR 6.81 crores and our [indiscernible] for the quarter was around 900 crores, and we have earned INR 7.72 crores, and around INR 700 crores of it is parked in long-term instruments, which is amortized. So even if the interest rate goes up or goes down, we won't be able -- we will keep earnings INR 7.72 crores. And for the quarter, the yield was around 7...
Okay. And the next question is, sir, basically to understand on the future optionalities. One is the electric derivative. And the second is that till we don't go live on TCS means all the incremental approvals that is our plan to launch the buying monthly the gold contracts will get delayed, right? So that's the right understanding. And I just wanted to understand on what is -- how it is happening with respect to electricity derivatives when it can go live.
Well, there's no movement on the electricity derivatives contract as yet from the approval point of view. And that is something which we have been asking for -- that's one part of it. The second part of it is, we would like to launch new contracts only in the new system. That is what we are very clear on that. And so that migration will be easier for us. And that's the way it is. We would like -- yes, you are right. Because of this delay, some of the launch of new contracts has got delayed, and that is something which is not anticipated by us in the year.
Got it, sir. And last one on base metals. I think you have alluded to that point, but I just wanted to understand that at on some -- at some point in time, the mini contracts are meaningfully around 7% to 8% of the total future volumes. And even the nickel contract was at one point of time, 7% to 8% of the total future volumes. Honestly, these 2 have not become -- nickel is almost 0 today. And the mini contracts have not contributed to the extent what many people have anticipated before the ban was introduced. Sir, just wanted to understand how we can revise both the things, mini and nickel. And so the futures could see a traction.
See, the nickel contract, you know that it got lost in terms of liquidity because of the what has happened on LME, okay. And some of the players may have deserted this counter. And so that's why we lost liquidity. Second, the way to revive as we understand, is to introduce a mini contract rather than a bigger contract. And currently, it is 1,500 kg contract, it was -- so we would like it to be a smaller contract. Maybe smaller itself is good enough rather than going for a main contract. That's one part of it. But the only issue is that trading lot and delivery lot has to be identical is the requirement of the regulation. And that is something which we are waiting for some addition on that. So is in the case of copper. That was also doing well. The mini contract of copper was doing well. So we don't have -- we have not introduced mini contract in copper as of now because the trading unit and delivery unit has to be identical is the requirement. So having said this, these 2 are also contributing at that time with good amount of volumes. Now coming back to the other -- the zinc mini or the lead mini and the aluminum. I think if I'm not mistaken, aluminum is doing well, and the zinc was also doing, definitely not as much as we wanted it to be as it was contributing in the past almost all 20%, 25%. And that day, we have not seen, as I have clarified also some time ago that all the investors who had traded in this contract have not come back as yet. While our effort is to reach out to them, I mean, through the member brokers and tell them that he is the mini contract, and this will help in hedging in smaller players. And we are also reaching out to the MSMEs. That's a very important segment, and we are engaging with them to show that they can hedge their risk using these mini contracts. That's the way it is at this point in time.
Our next question is from the line of Amit Chandra from HDFC Securities.
So my question is in terms of the [indiscernible] in terms of the marketing that we have done. So for how many hours we have tested this software in the full ready states maybe in the month of June. And is there any kind of a benchmark where you can guide us that how many hours of testing is required for the software to go live, like whenever you're planning to do it? And what actually gives the confidence that we will be live before the time lines. And if we go live before the time line, so it will be a parallel run? Or will it go completely live irrespective of the software of 63 Moons being there?
Well, see, in the past also, we explained when we were this question when we wanted to go live. You go live that's it, there's nothing called 2 systems running simultaneously because that doesn't happen, okay? So the question is how do you do the parallel runs is that you take the dump from the existing system for a particular past trading date, okay? It could be even yesterday, or it could be as well as maybe one month ago, create the same circumstances, what was the collateral at the system at the time, what was -- what you call members various clients, UCCs, all of them you configure and then pump the data and then see that you get the correct results.
So that is the way that parallel runs are going down, okay? That's the way we have done. And so coming back to the other question as to the, how many tests were done, I think I do not know exactly in the month of June, how many then, but we have done in the last time some time about 30, 35, we have done. I don't exactly remember 30-35 in last 2 months June -- and April, May, June. That's the way I will put it. Parallels were done. And we have also done more importantly is, we used to migrate the data of Friday that is the latest data. When you want to go live, obviously, you take the Friday's end data and then migrate it and then give it to the members for the Monday trading. So like that, we have done migration of real-time data and then members have to test on a Sunday we had given and then in real life scenario, we will erase mock trading data after Sunday, and leave it open for the system for Monday onwards real-time trading. So those tests also we have done, not that we didn't do that. And so the point I'm making is all those things were carried out. As I said, some of these observations that came and the EOD/BOD taking more time and system not being available ready with certainty by 6:00 is one major dampener is what I would like to see.
Okay. Now sir, is there any kind of a statutory requirement in terms of the number of hours that you need to test or in terms of the check...
To my knowledge, there is nothing that is prescribed.
Okay. And in terms of the issues that we were seeing is like was it widespread across members? Or is it from smaller like member brokers or some larger amount of brokers. So if you can highlight from where the exactly the problem is coming?
It's not a question of smaller member or bigger members. Some may be localized, okay? Who's ever participated. I mean, some may have been localized. But the EOD/BOD nothing to do with any specific member or anything like that, which is a -- it's a kind of time taken for processing various files, et cetera. That's the way it is.
In terms of the appointment of the CTO and the CRO, so how critical are these 2 positions in rolling out in software?
Well, when we had appointed in the past as CTO, we had also taken one more gentleman as a CDO, Chief Digital Officer, other designation. But we are fully aware that technology is a very critical component, and we need backup also for that. That's how the Board has decided that we should have 2 senior executives in this profile. So as regards to the CTO, we have to replace the one who left. I think process is on almost all completed. I think once it is necessary approvals are obtained and they will join, that's the way it is. Of course, they will take time to join off, as you know, all that.
So from that angle, is it a mandatory, so in terms of the joining of the CTO having the CRO. So the CRO role is more critical and obviously, CTO is there. But CRO also from the regulatory angle because there's a lot of regulatory angle also involved in terms of rolling out in software. So how that is being taken care of as of now.
Well, we have internally another senior officer is discharging that functionality, who was earlier inspection and surveillance looking after, so he has been designated as a CRO. While the CRO appointment is again is getting closed. When I say that it's getting close, all processes are complete. It's just that appointments how to be done and acceptance has to be received, then obviously, they will join thereafter.
And for the CTO.
CTO is also the same thing. We just have to get their acceptance, that is all.
Our next question is from the line of Chirag Maroo from Keynote Capital.
I have 2 questions. Both are related to tech. I just wanted to understand, I understand the buying that you are unwilling to let us know what is the investment amount you're spending on the table. But could it be possible for you to share us that compared to investments that you are doing on tech, how much cost or quotation that 63 Moons gave you for the current software that you are using?
No. Are you saying that 63 Moons, what offer they gave for buyout, is that what you're saying?
Yes. Yes. Compared to what -- compared to investments we are doing.
I think -- I mean it's not appropriate to disclose those commercial matters, but it is substantially high, so much I can say.
Can you say that it was 3 to 5x.
No, I do not want to say that, please, because it's not proper for me to comment.
Sir, my second question is, as the delay of the software getting a start for the run is impacting our P&L statements by the way, we are paying a little higher than earlier times. Like now we are going to pay INR 125 crores amount. I just want to know, in a similar way, is there any sub clause in the contract with TCS. I would state that if there is any delay in getting the software ready, they will be penalized for somewhere and...
Well, as I clarified in the last call also, there are penalty clauses and which were usually whatever the vendors we have it, there is a penalty clause of course.
Our next question is from the line of Sanjay Kumar from ithought PMS.
So INR 20 crores growth quarter-on-quarter in transaction income has translated to INR 9 crores increase in EBITDA. That's the kind of operating leverage you're sitting on. Rather, I would say you're wasting the leverage potential. My first question, so when we spoke to a broker, they said commodity options are growing because now a trader can use the equity F&O margin for commodity ethanol as well. So how many member brokers have this gross margin functionality approved by the regulator. Any idea?
See, there is no interoperability of the Clearing Corporations unless otherwise, that kind of gross margin will not happen. If a member has in NSC, let us say, INR 5 crores, INR 10 crores or INR 100 crores is lying unless they deposit physically that particular money in the Clearing Corporation of MCX that kind of benefit cannot be given. That is the current position and the regulatory position. So there are members who do shift, I mean, transfer if there's a cash balance, they do shift to CCL. Again, next day morning, again, take it back to the NSC. But this operating -- operational inconvenience at times lead to a lot of pressure on the member brokers as well as the Clearing Corporation because it has to happen in a [indiscernible] kind of thing. Yes, some do operate in that manner. But we had given certain suggestions to regulators, helping us to provide maybe [ SME ] interoperability kind of situation. And they are examining, I suppose. And let us see.
Okay. Second on futures, in July, at least till today's data or yesterday's data. The futures ADT has gone below INR 20,000 crores, I guess, for the first time in a long time. Can you confirm it? And are you doing anything to boost this futures turnover? Or are you comfortable with this de-growth?
Well, there are 2 ways of looking at it. I mean we are mostly concerned about ADT because we get revenue out of it, okay? Now it could be as flimsy as just a day trading and then people just manage overnight also. But there is another way of looking at is, what is the open interest that is maintained on the exchange. That gives us immense confidence that they are staying put in the exchange. We had almost all INR 20,000 crores open interest in these futures. And another -- in the, what you call, in options are INR 10,000 crores. So what is important is how stable is the participation on the exchange is more important. Yes, the trading depends on the margins also.
The margins are high in the case of major commodities in crude, NG and gold. And in gold, we have an additional margin of 2%, so assets is 10%. Additional margin is 2%. In the case of crude oil, I think a margin of 10% is imported, so is on natural gas. So this is somewhat causing more damage, I would say, to the futures turnover. So maybe diverting them to the options to some extent, of course.
It's important that we reduce the cost of trading to the investors. And if we don't do that, there is a downside for the exchanges, we have to contribute more money to the SGF now unless you contribute more to the SGF, you cannot have more open interest. So this is what we call a dilemma or this is the kind of situation we are struck.
Okay. And options from the numbers you gave, it looks like option fee is INR 80 per crore of turnover, which was INR 105 in Q2 and Q3 of last year. When you launched you said options is 33% of Q2 is 1/3, then it went to 51% during those 2 quarters now, it is down to 39%. How do you -- how to look at it on a normalized basis, what would be the ratio? I know you answered to another participant, but if you could explain from this angle what besides the share of out of premium out of money or [indiscernible] because last quarter, it was 43%, now it's 39%. The variation is even Q-o-Q is very significant.
Well, see, since the option, we have only 2 slabs, one is INR 50, other one is INR 40, now with this kind of growth in options, everybody is falling in the INR 40, what we call bracket. So [indiscernible] it can go down below that INR 40, okay? Now if you compare with futures, when I said earlier, it is 33%, it's a ballpark figure, and it's a conservative figure, but our realization was better at that point in time, that's why we made -- I mean, it was -- as you said, it's 45% or 50% and then it has come down. And as we go maybe more and more, it will tap profit INR 40 per 1 lakh. That's the way it is. It cannot go down.
Due to time constraint, that was the last question of a question-and-answer session. I would now like to hand the conference over to Mr. P.S. Reddy, MD and CEO, MCX, for his closing comments.
Thanks to all of you for patiently listening to the conversation we had and so many questions have come. As I said, I myself was disappointed for not being able to do the technology transition. This is something which we have taken as a challenge. And we are committed to make it happen is what our statement is to be investors. This is something which we are driving passionately. Thanks to all of you.
Thank you. On behalf of Multi Commodity Exchange of India, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.