Multi Commodity Exchange of India Ltd
NSE:MCX
Earnings Call Analysis
Q2-2024 Analysis
Multi Commodity Exchange of India Ltd
The company's discussion around the Settlement Guarantee Fund (SGF) illuminated a requirement of keeping a minimum capital amount of approximately INR 560 to INR 570 crores, which currently guarantees an SGF cover of nearly INR 744 crores. This safeguard is augmented by contributions from trading members and is essential for market stability. As market activity and the open interest grow, a stronger SGF becomes mandatory. These measures are vital for ensuring that the exchange can meet its settlement obligations, which is a cornerstone of investor confidence.
In an effort to streamline offerings and concentrate on scalability, the company decided to halt the issuance of certain contracts that showed minimal trading activity. For example, specific contracts only attracted six clients and incurred about INR 20 crores of volume, which the company deemed inefficient. The emphasis has been on improving the technology platforms to scale with the ones that display higher volumes and client engagement, particularly in times of market volatility. Such decisions reflect a strategic focus on resource allocation towards more profitable and scalable product offerings.
The company discussed capitalization of expenses related to their new platform, which will be followed by a depreciation schedule. However, the exact amount capitalized was not disclosed. The company views these costs not as recurring expenses but as investments for business growth, which will be depreciated over time. An increase in open interest in the market reflects positively on the company's growth and will be factored into the future costs associated with the platform as it becomes a recurring item on the balance sheet.
Open interest currently stands at a historical high, approximating INR 40,000 crores, raising the query of whether contributions to the SGF will become a recurring necessity. The company clarified that future contributions would depend on whether the open interest exceeds the 'high water mark,' if it does consistently, contributions to the SGF will recur, enhancing the exchange's risk management capabilities.
In ongoing discussions about exchange requirements and policies, an expected recurring cost emerged, specifically if the open interest averages roughly INR 40,000 crores every quarter. Should the average exceed a set 'high water mark'—which was approximately INR 42,000 to INR 44,000 crores, though not precisely known—the company would be obligated to make additional SGF contributions, impacting the P&L.
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Ladies and gentlemen, good day, and welcome to the Multi Commodity Exchange of India Q2 FY '24 Earnings Conference Call. Joining us on the call are Mr. P.S. Reddy, Managing Director and Chief Executive Officer, MCX; Mr. Manoj Jain, Chief Operating Officer, MC X; Mr. Satyajeet Bolar, Chief Financial Officer, MCX; and Mr. Praveen DG, Chief Risk Officer, MCX. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes.
[Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. P.S. Reddy, MD and CEO, MCX. Thank you, and over to you, sir.
Thank you, Madam. I welcome all the participants in this analyst call. This quarter, as we are rather in the current quarter, we have launched the CDP platform. This is what we have been waiting for the last 2 years and 8 months. And finally, this has been certified. And then my grateful to the regulators, market participants, the clients and the TCS technology partners and other vendors who have helped us in scaling this height, of course, my Board and Scott and [indiscernible] committee members, they all stood rock solid and supported the management and the management team in this process of data migration and other technology migration.
And more important, and I count on it many times, the well wishes of the shareholders and the other stakeholders of the MCX. We have been desiring that we should scale greater heights, and they wish to me on so many occasions in whichever way they could help, they help and grateful to all of them for their -- for supporting us. And also grateful to all the people who have reposed faith in us that we may fail once, we may fail twice, but not all the time. And that's how it happened. Maybe we were not able to meet the expectations on 2 other occasions when we plan to go live. But this time, we have been successful, and there's hardly any problem in the system that we are running.
And we have completed one complete cycle of deliveries, expiries, margin competitions, whatnot. Whatever the complexity that is involved in turning an exchange has been done and successfully? Maybe sporadic events may be confined to a particular member and that we have the latency. And we have -- as late as yesterday, we been addressing the latency issue also. And now it is much faster. And I think we are expecting the volumes to be contract as much as we had prior to the launch of the platform that is from -- in the first half of October, what are the volumes that we have logged we expect the full volumes to come back. This is on the CDP that is commodity derivatives platform.
Having said this, I'm also seeing -- I mean, this quarter, that is the quarter ending September and the quarter ending December will have a major impact of the payments that are made to the previous technology vendor, which is already disclosed to the market participants and its impact is pretty huge. This is one important reason for which reason the stock has -- I mean the financials have seen a hit.
The second one, of course, it's good to have a problem in the sense that we helped to contribute for some of the INR 11 crores odd we have contributed to SGF. And the SGF contribution is needed because the open interest on the exchange has been increasing. That means people are sticking onto the platform, and they're keeping their positions open -- and they know that this is the platform where they have to hedge their risk, the commodities exposure that they have.
So obviously, that is the requirement, a GIFT requirement of these regulations. So we have to comply with it, and we'll continue to comply with that. But it's not something -- although it is an expense, it's not something that we have lost this money in that sense. So it is just partly maybe the another bucket called NCF. I would not like to take much of your time. Probably as we go along, I will answer questions. Maybe more details will be furnished. I think I request you to open for questions. Thank you.
[Operator Instructions] We have our first question from the line of Amit Chandra from HDFC Securities.
First of all, congratulations on the technology shift that has happened finally. And sir, my first question is, so as we have achieved the transition. So how we are seeing the pipeline in terms of product launches? Because as we have said earlier that we have a lot of approvals that you have received in terms of launches. So if you can throw some light on the product launches? And also I have a follow-up that I will ask it.
Okay. Product launches, yes, we have seen approvals -- and we are going back to SEBI to get that renewed, okay? When I say renewed, it's not that it's expired or anything of that kind, but just to revalidate that we are going ahead with this launch. So we are in the process of doing that. And once we do that, and thereafter, we will launch all the contracts. The more important at this point is the steel TMT bar contract. That is something which we propose to launch at the earliest. And let's -- and I will start out and of course, we will inform the market participants well in advance when we launch our contracts.
And sir, we have the index options approval still we have received at the -- a date early part of the year. So like for the index options, we will have to like renew it again from SEBI? And also what is the possibility of the DT options because we are also thinking of reducing the tenure of contracts and also launching some shorter duration contracts because if you see what is happening on the other exchanges, so the whole volume is shifting to shorter duration contracts. So like what is your view on it? And how the like regulators is actually looking at it from the commodity angle? And also on the like mutual funds, PMS and FPI participation, we have seen some traction there, but still it's very small on a portion of the overall volumes. How do you see that improving? And after the launch of the new platform, can we see some traction there?
Yes. So the first question is with regard to index options. Index options regulatory enablement was done. We have never said that we have applied it or got it because you need it again, there also INR 1,000 crores of -- there is a -- I mean we have to, of course, make an application. Given the kind of volume that we have in this, we have not made an attempt as yet.
And so regulatory enablement is what is done. That's the only thing that has happened. So we have not as yet applied. Coming back to the other contracts, the -- as I said, we will be launching them as and when -- I mean, we need to see the ecosystem also. And accordingly, we will launch them. The smaller contracts, yes, it is the quiet tenure, and we will -- the smaller ones in terms of tenure of the contract should be not monthly or bimonthly, it could be smaller.
And I think that is something which we had on contract, gold options for monthly contracts on a bimonthly contract. But it's something which we have to work through on that and then we'll launch that. And the small -- still smarter ones will be fortnightly or weekly. I think that is -- that will have to be taken up with the regulators for April. So this is what it is.
Okay. And sir, in terms of the increasing competition, I know we have the dominant market share. But the regulators allowed the other exchanges to launch options and despite they are not fulfilling the criteria for the launch. So how do we see it? Is it a risk for us in the -- like in the medium term?
And also in terms of the SGF contribution based on how SEBI has been approaching this and asked all the exchanges to increase the SGF on the equity side also. So based on that calculation, 5% of the total amount of exposure that is there has to be there next year. So based on that, the exposure that we have, the GA comes to around INR 1,100 crores or INR 1,200 crores for. So do you think that SGF will move in that direction?
Well, with regard to the first question, whether the competition is ready and well, we would like to live in the comforts of monopoly. But then competition teaches and strengthened our will power as our ways of doing business, and that's how we are fortifying ourselves. So to that extent, yes, we are not worried as much as it is made out to be. But yes, we have to be on guard constantly and then see whether we are slipping anywhere on our -- on the business front and then take necessary steps to [indiscernible] in these areas.
On the requirement of SGF, I'm not too sure where this 5% requirement has been prescribed. There is a formula at this point in time. And currently, the requirement, we have been -- whatever keeping is about INR 560 crores to INR 570 crores of SGF required. That is our minimum required capital. And as such, you add what you call Penalties and others, the SGF cover is almost INR 744 crores we have.
So let us see, as we go along, we need to keep on strengthening it. Probably members also contribute. This will further get strengthened. But that should be made mandatory across the exchanges, then only there will be no regulatory upper class. Otherwise, it will be -- it will not be good.
We have a next question from the line of Devesh Agarwal from IIFL Securities.
Also my congratulations on successfully completing the transition to the new platform. So my first question is we have seen some moderation in volume post the shift to the new platform. If you can share some details of whether this is on account of some lesser functionalities on the new platform compared to what we had on the older platform. And is there any part still by then we need to give the complete functionalities to the market?
I don't attribute to any functionality, okay? Those functionalities we have seen actually when we have decided -- taken a decision not to release those functionalities, we have taken how many numbers are trading? How many clients are trading in that -- there's hardly any number, okay? I mean in one of the contract, it was 6 clients were trading, okay, other 6 members were trading, and that to volume was about INR 20 crores, something of that kind. So the -- it doesn't make any sense for us to launch that contract, actually, such kind of things are coming in the way of a scale-up of the technology, okay? And I will explain maybe a little later as to what is the scale up that is happening. That's one part of this.
Yes, as I said, the period from 1st October to 13th October, if you see the volumes were options, especially they were pretty high. If I'm not mistaken, it is INR 1.3 crores or INR 3 lakh crores, INR 1.3 lakh crores around the first quarter of it. So the 1st October to 13th October. And yes, after launch, there are some issues some members face that there are more to do with the some of the latency or some of them may be related to what we call some data packets, order packets, not the trades, getting delayed response, okay? These are the things that were experienced. As I said in my introductory remarks, they're all fixed behind us. I'm sure we will see good volumes provided there is volatility. That's important. The underlying fact is that.
And secondly, sir, I think I missed, what did you say about the monthly gold option contracts. Is that not something that you have taken up with the regulator already? And can we that -- can you see that this will launch over the next 2, 3 months?
Yes. I said that contract is already there and renewal is what is applied. And we will get it and when we get it, we'll be able to introduce.
Okay. Also sir, this 16 October, you would have capitalized the amount for the new platform to the CDP. And I'm assuming from third quarter, the depreciation and other related costs will come in into the P&L. So do you share what is the total amount that has been capitalized and over what period would we be amortizing this?
No, I think when we announce the results for the third quarter, we will definitely give those details. But more importantly, this is amortized over 5 to 8 years. That's what has been the policy depending on the item.
Alright. And finally, sir, on the SGF contribution, which we've seen in the month of September and again in October, INR 14 crores, any basically numbers that you could share that would this be more of a recurring theme going forward? And should you build some INR 20 crores, INR 30 crores of quarterly kind of a run rate for this?
As I said, this is not something which is an expense. Although it is accounting treatment as an expense, it's not going out of our hand or anything like that. And it is quite for the growth of the business is what is -- what we are looking at it. And so we need to look at it positively, not as a negative. And whether -- is it going to be a recurring or not? I will not be able to comment, the reason being this. In the last 3 years, we did not contribute because the open interest did not go higher.
Now as I'm speaking, the open interest is almost a INR 40,000 crores, maybe in the last several years, maybe 5 years, 6 years, 8 years, maybe it is the highest ever. So immediately prior to CTT, what was the number. I don't have it readily. But at this point, in time, this is something -- it is a high water mark is what we are talking, I think the other based on INR 43,000 crores also. So if the businesses grow, people retain their open interest, I mean, for trading next day, whatever it is. I think it's good for us.
Good for us, more and more traders will be attracted. The open interest is one key criteria, key parameter. Otherwise, only data use will be there. So coming back to the question, will it be a recurring? Yes. If it keeps on increasing it, open interest, it will be recurring. But if it stays at this point in time at INR 40,000 or INR 43,000 crores, whatever it is, then it will not be recurring.
Understood -- and sir, finally the accounting ratio and then I'll go back in the queue. Cost is the interest income that we earn on this [indiscernible] SGF balance. Does that flow to the P&L or does not? And the expense that we incur in the quarter, this quarter, be INR10, INR11 crores. Do we get tax reduction on this?
Yes. I just take it. Yes. So the interest income that we earn on SGF is routed back to SGF. It's not routed to the P&L and the contribution that they made to SGF would be an allowable deduction in our income taxes.
We have our next question from the line of Prayesh Jain from Motilal Oswal.
Congratulations on a successful transition of the software. Firstly, on the -- just a data driven question. What was the options revenue in the quarter?
Yes. So during the quarter, we are INR 82.8 crore on options.
And for the half year?
I don't have the half. Yes, so it's INR 82 plus INR 64 crore.
Okay. Got it. And sir, just continuing on this SGF bid. You mentioned that you had a bit a high of INR 43,000 crores of open interest. So what are the next forward levels do you -- would you see before you would have to contribute incrementally to this SGF?
See, whatever is the high that we have got it. I said INR 43,000 crores it's around. It's not a -- I don't have the exact figure right now. So the high water mark will always remain, and if it is below that, then we don't need to contribute. If it crosses in the new -- what the high-water mark is kept, then we have to actually contribute.
Okay. okay. And sir, in this transition -- before this transition, there were certain aspects of the regulator regarding -- one was, obviously, the SGF -- partial withdrawal of SGF. Second was, I think the -- if you have a net position on the equity side, you are allowed to give net margins. But on the commodity side, you have to have margins on both the positions. So you wanted that kind of approval as well. And thirdly, there was another thing where you were looking for interoperability of margins between BSE, NMCE and ICEX. So any of these talks that would have started with the regulator? Or how should we see this kind of evolving over the next 2 or 3 quarters?
I'm Sorry, I think you need to repeat. I...
So before the transition happened, I think we were in discussion with the regulator for 2 or 3 aspects. First one being the partial withdrawal from SGF. Next one was the fact that the way we see it on the equity side where you have to have margins based on your net positions rather than margins on both long and short positions. Here on commodity side, do we have to give margins on both the positions is what I have been made to understand. So whether that can be sorted with the regulators?
Yes. See, one is that on the on the SGF [indiscernible], I think there's a circular that has been issued. But how much is the minimum -- as far as our requirement at this point in concern, it is going up and up only. So that is why I said it's happy to have a problem, but the calculation of it is what we are approaching, the subject matter to SEBI, that methodology has to be changed is what we have been asking. That has not as yet been addressed, that's been under consideration. This is one part of it.
The second part of it is interoperability of the margins, that is, again, has taken up very actively. I think there is an industry standard forum has been established. And I think many of the participants from the members also and the members and associations are -- the member associations are also actually involved in that. So the recommendations are going to SEBI for their consideration. That is what...
Okay. And sir, with regards to FPI's participation, what is the kind of traction you're seeing? And do you see this business to be a meaningful contributor, say, 3 years down the line? And obviously, one of the entrances to this was the technology transfer and now that's behind. What are the things -- what are the enablers that would be needed from your end to kind of scale up this business?
Yes. One is that the FPIs look for expecting a DMA to be given. I think we are already there on the DMA. We have to release it to the market. I think the system is getting stabilized. I don't want to disturb it at this point in time. But sometime this quarter or early next quarter, definitely, we will release DMA facility to the FPIs that is going to happen. So that is what they are looking forward to. That's one part of it.
The second part of it is, there are a lot of teams who have taken the membership on the exchange, and they are on sidelines because they don't want to incur IT development on the old platform and new platform. Now they are all now actively looking at it. I'm sure we should be able to get traction out there as well. And that's another area which we are looking forward to have as we go...
[indiscernible]
But -- I'm sorry?
Sorry, continue Sorry, sir.
In the medium term, yes, we expect FPI to contribute substantially for this market.
Are there any specific products that the FPI would be more attracted towards?
No. As of now, they are only interested in cash or cash settled products only. And Algo also they will be playing -- I mean, being interested in algos also. But then they will come through via some members only. That's what the DNI is particularly, but then they will manage themselves. Absolutely.
The last question on the -- just on the P&L side, you have a higher depreciation in this quarter. Any specific reason or how should we build -- how should we build this going ahead?
See, while we are what we call implementing the CDP, a lot of assets, which are maybe less than 1 lakh, et cetera, are required like laptops, et cetera, desktops and other things. So that's what we have provided for in this one quarter itself. -- so that it will not be -- I mean that's their policy. We've gone to their policy.
So this is normally a recurring run rate for...
CDP, right? It will not be. But anyway, in the current quarter, having implemented the CDP, you will see a bunch out there.
Yes. Ex of CDP, this would be the run rate. Over and above that, we will just get a depreciation.
That's right.
We have our next question from the line of Sanketh Godha from Avendus Spark.
Sir, my fundamental question is that if you intend to launch the expiry options, we need to have a weekly future, right, because our options devolve into future. So if you don't have these PE futures, we can't -- can we launch expiry options? That's my first question.
Yes. Okay. When I say it's weekly options, it's not weekly being expiring it. It is a -- maybe 4 monthly contracts having different expiry dates is what the whole concept is, okay? Because you can't have any random SCRA less than 11 days to the contract, okay?
So it will be a monthly contract expiring?
It will be a 1 month contract expiring.
In any case, the underlying features will be there. It's not necessary. Once it expires, the feature has to necessarily expire in the next 2 days or 3 days. That's on the requirement.
Got it, sir. That's perfect. And second thing, sir, now given we are missing contribution towards there, is there a probability that now we can reduce the margin requirement in crude so that futures volumes can pick up in crude because one of the reasons why we were electing to reduce the margins on crude is because the contribution goes to SGF. So any change in the concept -- and what is the current margin requirement for crude?
Current is 40%, 40%, 41%, 40% for crude, or 31% is for LNG, okay, including the margin. But whatever contribution we have made is not to reduce the margins. In fact, the what you call the under scenario and see the expected loss in the event of all position of 50% of the market positions are called out, we expect a loss arising out of that. is what is assessed. Again, it needs to be in the 40% and 30% margins are also adjusted. Still there is a shortfall. That is the shortfall we have contributed.
Yes, go ahead.
Hypothetically assume tomorrow, your open interest increases from currently what you alluded to at INR 40,000-odd crores or so, to say, INR 60,000-odd crores. So which means that the INR 1 crores, INR 2 crores what we have provided will be provided in the next quarter too, right? Or if I want to put it in this way, every quarter on an average, every quarter, you have INR 40,000 open interest -- INR 40,000 crores open interest, then this INR 11 crores or INR 12 crores will be recurring NII or if it goes beyond INR 40,000 crores only then if you come into the P&L. As I said, the high water mark is what is taken into consideration. The high water mark was around 42,000, 43,000 or 44,000. I don't exactly have the figure. If it goes beyond that, okay? And beyond that, it's not just 1 day, it is the average for the entire month, okay? And for the average entire month is more than that much, again, the requirement will go. Okay. But so in one month, say for 5 days it shoots up, then again, it goes down, then we will not.
It will not -- the average will not be changed. But also, we also impose additional margins whenever such kind of activity is taking place. So that will also come as a buffer to this SGF requirements at that point in time. And so it is -- if in spite of those margins, if the members are trading, the clients want to retain their positions open interest, it is only then and then if the average goes beyond high water mark, then we are required to contribute.
But sir, this open interest is predominantly increased because of the option only, right sir, rather than future increased because of options. So if option volume continue to sustain the current trend and accordingly, the open interest goes up, then it should be assumed to be a continuous phenomena. Is that a fair understanding, sir?
Well, options is contributing about INR 20,000, INR 2,1000 crores of open interest and then future is contributing about INR 20,000, INR 22,000 crores. So -- to the open interest. Now within that, again, for futures maybe gold and others and then options it is Unico, MP. So it all depends on that.
Got it, sir. And last one from my side, the final question. Sir, if you can break down your operating revenues into income from float connectivity charges and so forth, just to understand how much of transaction income and other income on the other operating.
Yes. Sure. Yes, sir, the transaction charges was INR 133 crores out of INR 139 crores, INR 133 crores came from transaction charges. And then the balance is membership fees, terminal charges, connectivity charges and all the authorized membership fees and others.
How much was growth income, sir? Float income..
Float income in consolidated that's around INR 27 crores.
I meant to say the float from the margin money, not the entire year.
Yes, yes. Yes. So sorry, that's not INR 27 crores, INR 23 crores. INR 23 crores.
This is only from the margin money, right sir, not from the entire funding?
We have our next question from the line of Lavanya Tottala from UBS.
Hello. Congratulations, sir. So just wanted to check on AMC cost that you need to be paying to PCS from the current quarter. So the current quarter will be having both the cost of TCS as well as cost which we need to pay to 63 months, which is INR 125 crores. Both will be hitting in the current quarter, right?
Well, as far as TCS is concerned, for 1 year, it is under warranty. So till next October, the next September, I would say, there's not any.
Okay. And on the admin cost, this quarter, we had higher cost of around INR 32 crores. So will this be the run rate going ahead? Or is it one-off in this quarter, given that we were transitioning?
Admin you're saying INR 32 crores?
Yes. I mean, sorry, it is both other expenses other than staff and software, all combined was coming to INR 32 crores.
INR 32 crores in admin, yes. It is INR 45 crores, if you take computer technology expenses and employee cost, INR 27 crores, and then we have legal expenses and CSR and other expenses. So it adds up to INR 45 crores, and then you have another INR 6 crores for depreciation which adds up to -- yes, it's INR 200 crores. And then the other is all linked to our turnover, what we have paid to 63 months as PSoC, regulatory fees and contribution to SGF.
So the current run rate will be similar next quarter also or there is any one off is what my question was.
Next quarter, we'll have a slight bump.
Next quarter means -- just to clarify the current quarter?
Yes, current running quarter.
So there would be certain A&C costs that will come in for our new system that is going live for the operating -- for the licenses and all that would kick in as well as the depreciation would kick in.
Okay. There is an AMC, which will kick in, in the current quarter then.
On TCS.
AMC relates to, let us say, IBM Db2 is our database, Db2 licenses and some Microsoft licenses. These are the ones.
Okay. So how much will be that amount? Any broad range of that?
I think only next quarter only we will be able to give you that amount and that other when we give the results. I don't think it we will December.
Okay. Got it. And on the new products which you mentioned, that which we are going for renewal, one is steel TMT and gold monthly options? Do we have anything else which are there already we have approved and looking for current validation?
See, I think it's not -- renewal is not the word, maybe some are under the renewal, but then some are actually say, go ahead, yes, now that you have now stabilized and then you can go ahead is what we are looking at. And these are the 2 ones that we are looked at it. And maybe the cotton contract is another one, which we are waiting for some changes that the product advisory company has suggested. And that is one thing we are going to ask for it.
And some mini contracts also, we have requested them to -- we have requested them for consideration. And of course, the electricity is another one, which is we have been waiting for -- but we will -- now the focus will be on our business. For so many months, we have what we call -- we couldn't focus on it, but now business, business, business, that's all. We have new products, new type of participants and new areas engaging at the financial institutions and et cetera.
Got it. So maybe on this TMT, any reference to the global markets, like how big is the steel market, like crude and natural gas is very big in global markets as well. So steel any reference that we can see from other global markets? Or how do you see the addressable market in...
There various types of contracts out there. There are about [indiscernible] contracting also there in some China and other markets. And steel bars are there, steel ingots are there. So I think it's fragmented in terms of various products are concerned and value chain is concerned. Probably, I mean, I don't have readily that information. But we steel TMT is something which we are actively pursuing because there's a lot of construction industry and the infrastructure industry is booming. That is something which we are looking forward to.
Got it. If I can squeeze in one last question. So on the competition, so do you see if the competition reduces the prices of options or like the transaction fees, would they see more traction or like anything on the transaction fee or pricing that they can play around?
Well, we see the transaction fee assets that we have is also very marginal. And I don't think that will impact because liquidity is something which cannot be taken away from one exchange to the another exchange by playing with these numbers. And we have seen in the past also, not that they have waived also, many of the transactions in the first, yet nothing happened. That's the way it is.
Okay. So is the understanding right that even if they reduce option pricing, the liquidity in future is what is more important?
No, I'm not saying that the liquidity in options cannot be taken away by reducing the charges of the -- on the premium. That's all I'm saying.
We have our next question from the line of Chintan Sheth from Girik Capital.
Congrats for the successful transition to a site management unit. And a couple of questions on the [indiscernible] accounting. You mentioned about how it came in for the calculation this quarter into the P&L. Is that an accounting change where in the earlier years resulted directly to the balance sheet and this turnaround, it was to P&L? Or this is -- this has been the case earlier as well, you can...
The last transaction last transfer that we made -- the last contribution that we made to SCA was sometime in March '20, and it will all get ordered through the P&L.
Okay. Great. Okay. And second, on the CapEx front, if you can spell out now once the thing has been over, what will be the total CapEx expense for the PCS on this new migration? And total CapEx will be incurring for this full year, if you can elaborate that.
As Reddy mentioned that we'll take this -- it will be disclosed when we disclose our December results, we mention -- declare it at that time.
So I'm not asking about the OpEx part on the yes, on the CapEx side because in the earlier call also in the Q1 call also we have been expecting it. But if you -- now that the transaction has been over actually several months I think...
Earlier also one more analyst has asked for the same thing. I think we would not like to disclose it at this point in time. It is there in the balance sheet or whatever is -- I want to call...
There won't be any addition if I can ask from the [indiscernible] if there is any increase in the second half.
No material addition.
That's right.
Okay. And lastly, on -- in terms of the premium to turnover in the option side that we have seen a decline over the course of time. How do we see this premium turnover to option turnover ratio? If you can explain what impacts this ratio over there because of the [indiscernible], but not the premium [indiscernible] equivalent extent of the overall net. So if you can help us understand how should one look at it, obviously, the there is an impact of the low activity, but anything else you can help explain that?
See, we have 2 slabs from the options. Up to INR 55 crores or INR 15 per INR 1 lakh is paid by the participants. And thereafter, the incremental premium on turnover above INR 5 crores, much like an income tax slab [indiscernible] paid. -- okay. If you are coming closer to the INR 40 means the options volumes are increasing. So the average is being coming down. But it will not go below INR 40 because that is anyway the minimum charge. That's what it is. We have only 2 slabs.
We have our next question from the line of Rajesh Kothari from AlfAccurate Advisors.
My first question is with reference to increasing the participation, whether it is from the distributors, the brokers. Can you just tell us what efforts we are taking to expand the distribution and participation?
Well, see, on the member side, okay, it is coming down because of the members are consolidating their memberships under the unified regime of -- membership regime of SEBI. So to reduce their compliance costs, et cetera. So that is not the way that I look at this business. The number of UCCs that are trading are increasing, whether their tools sell it through [indiscernible] doesn't matter to us. RMCs not that they totally through A and B is also fine with us. So keeping that in view, we are focusing mostly on the number of UCCs.
While the business development team has the KRAs to increase the number of members, -- but as far as we are concerned, our focus is mostly on how many -- on quarter-on-quarter, how many more users hits have come in. And at the end of the year, how many more users have traded on the exchange. That is one part of it, and important. Second, the people who trade on the exchange, well, they are concerned about the cost. What is the cost of trading -- of course, CTT CT -- CTT as the [indiscernible] anything that's given to everybody.
So the next thing is only to mitigate in terms of margins. The margins means committing more capital in some of this. So that is where this NGL contribution should come. We have not contributed as yet, except to the requirement that is needed. But if certain dispensations that we have asked will come, then automatically, the participation will increase. That is -- that's another area that we are looking at it. In terms of fund houses, which -- who are participating and then how do we do that.
There are certain asks from the fund houses, not from us, but the regulatory regime. We ourselves have actually taken up with the industry as well as with the regulators, what is their ask and whether the cost can be made or not. I think well, actively is being considered by the regulator, these enablements. And I'm sure once those enablements come, more and more fund houses also will participate in it. Then another ask on a front, we are trying very actively the GST conundrum because we have various warehouses across the country.
They are required to be registering it because one doesn't move where one gets what you call delivery. So that is one major, what we call, stumbling block for participation in other contracts other than cash contracts. That's why if you see the vibrancy and cash contracts is more because of the only limited channels being available for such kind of participants. If the GST is also addressed, again, as I said, we are actively taking up at various forums and doing the work. So once those things are done, probably we will be able to address and attract more participation.
Sir, you mentioned that number of UCC, what you track. Is it possible for you to share some data that what are how many UCCs today currently we have?
Praveen, you can explain that -- what is the -- Okay. You have to speak here Okay. One more. Yes it is there.
Sir, we are unable to hear you?
I'm not speaking. So that's it. Okay. In the financial year-to-date, last year, that is 2023, we had 3 lakh, 74,000 users participated, okay? That is from April 1, '22 to September '22. And the corresponding period now in the current year, 5 lakh 84,400 odd participated. So that's a big jump...
Our line got disconnected. I'll take the next question from the line of Kamalesh Kasi from Pinpoint Asset Management.
Congrats on the platform transfer. Just a quick question from me. Over the past few months, have you seen any defaults on counterparties.
Absolutely, none. Maybe it's not just not this few years because for several years, we are not seeing any sort of active defaults on the exchange.
Ladies and gentlemen, that was the last question for today. I would now like to hand over the call to Mr. P.S. Reddy for closing comments. Over to you, sir.
Again, as I expressed my gratitude to all of you as well or otherwise shareholders on the exchange platform on MCX and continue to support us. We will continue to work towards betterment of these financial results as well as the business that we are in. And we work towards fulfilling the promises that we make. Thanks for all of you once again. Thank you so much.
Thank you, sir. On behalf of Multi Commodity Exchange of India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.