What Is MCX? Lot Sizes, Tick Size, CTT and Tax Explained

What MCX Actually Is

The Multi Commodity Exchange of India (MCX) is India's largest exchange for trading commodity derivatives. It started operations in November 2003 and is headquartered in Mumbai. You do not buy physical gold bars or barrels of oil here. You trade futures and options contracts whose value is derived from the price of an underlying commodity. The vast majority of contracts are squared off (closed for cash) before expiry, so most retail traders never take or give delivery.

A common point of confusion is the regulator. Commodity derivatives in India were earlier overseen by the Forward Markets Commission (FMC). In September 2015 the FMC was merged into the Securities and Exchange Board of India (SEBI). So today MCX is regulated by SEBI, the same body that oversees the NSE and BSE. This is why the original idea that commodities sit in a separate regulatory world is outdated. The same investor protection framework, margin rules, and surveillance now cover commodities.

MCX dominates the non-agricultural side of Indian commodities. Bullion (gold and silver), energy (crude oil and natural gas), and base metals (copper, zinc, aluminium, lead, nickel) make up almost all of its turnover. Agricultural commodities on MCX are limited (cotton, crude palm oil, mentha oil and a handful more), while the bulk of farm derivatives trade on NCDEX. If you want to trade gold, silver, or crude oil in India, MCX is effectively the market.

MCX Contract Specifications: Lot Sizes and Tick Sizes

This is the heart of commodity trading and the part most beginners skip. Every MCX contract is standardised by three numbers: the lot size (how much of the commodity one contract represents), the tick size (the smallest price move allowed), and the tick value (the rupee value of one tick for the whole lot). Get these wrong and you will badly misjudge your risk.

The table below lists the most actively traded MCX contracts with their current lot sizes and tick sizes. Always reconfirm exact specs on the MCX website before trading, because the exchange revises them from time to time. Prices shown are illustrative levels, not live quotes.

A Fully Worked Gold Mini Trade (Illustrative)

Numbers below are illustrative and not a forecast. Suppose you expect gold to rise and you buy one lot of Gold Mini (100 g) at a quoted price of Rs 72,000 per 10 g. The contract value is the price per 10 g multiplied by 10 (because the lot is 100 g, which is ten units of 10 g). That is Rs 72,000 times 10, which equals a contract value of Rs 7,20,000. You do not pay the full amount. You post a margin, which for gold typically runs around 5 to 8 percent of contract value, so roughly Rs 36,000 to Rs 57,600 here. Margins change daily with volatility, so treat these as indicative.

Now gold rises to Rs 73,000 per 10 g and you sell to close. Your gain per 10 g is Rs 1,000. Because the lot is 100 g (ten units of 10 g), your gross profit is Rs 1,000 times 10, which equals Rs 10,000. Another way to see it: the price moved 1,000 ticks (each tick is Re 1 per 10 g), and each tick is worth Rs 10 on Gold Mini, so 1,000 times Rs 10 equals Rs 10,000. Both methods agree.

Costs eat into that. CTT on the sell leg of a gold futures trade is 0.01 percent of the sell turnover. Sell turnover is Rs 73,000 times 10, which is Rs 7,30,000, so CTT is about Rs 73. Brokerage on a discount broker is often a flat Rs 20 per executed order, so roughly Rs 40 for buy and sell together. Add small charges for GST on brokerage and CTT, exchange transaction fees, stamp duty and SEBI fees, and your total cost lands very roughly in the Rs 150 to Rs 250 range. Your net profit is therefore close to Rs 9,750 to Rs 9,850. Had gold instead fallen Rs 1,000, you would have lost about Rs 10,000 plus costs. Futures cut both ways with equal force.

• Buy Gold Mini at Rs 72,000 per 10 g, contract value Rs 7,20,000.
• Sell at Rs 73,000 per 10 g, gross profit Rs 10,000 (1,000 ticks times Rs 10).
• CTT on sell leg about Rs 73, brokerage and other charges roughly Rs 80 to Rs 180.
• Net profit roughly Rs 9,750 to Rs 9,850 on margin of about Rs 36,000 to Rs 57,600.
• A move the other way of the same size produces a comparable loss. Use stop losses.

A Worked Crude Oil Example and Why Lot Size Decides Your Risk

Crude Oil is the most popular MCX contract for active traders because it moves a lot intraday. Numbers here are illustrative. The standard Crude Oil lot is 100 barrels. Say you go long at Rs 6,200 per barrel. Contract value is Rs 6,200 times 100, which is Rs 6,20,000. If crude moves up Rs 50 to Rs 6,250, your gain is Rs 50 times 100, which is Rs 5,000 per lot. If it falls Rs 50, you lose Rs 5,000. Crude routinely swings Rs 100 to Rs 200 in a single session, which is Rs 10,000 to Rs 20,000 per standard lot. That is real money for a retail account.

This is exactly why Crude Oil Mini (10 barrels) exists. The same Rs 50 move on a Mini lot is Rs 50 times 10, which is only Rs 500. Same trade idea, one tenth the rupee risk. If you are learning, the Mini lets you size positions sensibly and still practise on a live, liquid contract. The cost is slightly lower liquidity than the big contract, but for one or two lots that rarely matters.

Commodity Transaction Tax (CTT) Explained

CTT is a tax on commodity derivatives transactions, introduced in 2013 and similar in spirit to the Securities Transaction Tax (STT) on equities. It applies to non-agricultural commodities. The big ones for retail traders (gold, silver, crude oil, natural gas, copper, zinc, aluminium, lead, nickel) all attract CTT. Most agricultural commodities are exempt, which is why farm contracts on MCX and NCDEX carry lower transaction costs.

Two things trip people up. First, CTT on futures is charged only on the sell side, not on both legs, so you do not pay it when you buy. Second, on options it is charged on the premium, not the full contract value, and again only when you sell or write the option. So if you buy an option and let it expire or sell it, the CTT applies to your sell premium. These rates are small in percentage terms but they add up if you trade large size frequently, so always include CTT in your cost analysis before deciding a strategy is profitable.

How Income Tax Treats MCX Profits

This is where commodity traders often make a costly mistake. Profits from MCX futures and options are treated as non-speculative business income, not as capital gains. There is no STCG and no LTCG on commodity derivatives. The 20 percent STCG and 12.5 percent LTCG (above Rs 1.25 lakh) rates you hear about apply to shares, equity mutual funds and similar capital assets, not to F&O on commodities. Your commodity trading profit is added to your total business income and taxed at your applicable income tax slab rate.

Because it is business income, you can deduct genuine business expenses against it: brokerage, CTT (CTT is allowed as a deduction since it is a transaction cost), internet and data charges, advisory fees, depreciation on a trading computer and similar costs. You report this in the business and profession schedule of your income tax return (usually ITR-3). If your turnover crosses the prescribed limits, a tax audit under Section 44AB may apply, so maintaining clean books is not optional once you trade seriously.

• MCX futures and options profit is non-speculative business income, taxed at your slab rate.
• No STCG or LTCG applies to commodity derivatives. Those are equity concepts.
• You can deduct brokerage, CTT, data, advisory and other genuine trading expenses.
• Losses can usually be carried forward and set off against business income for up to eight years, subject to timely return filing.
• Keep every contract note and a monthly profit and loss statement. A trading journal makes the ITR far easier.

Trading Hours and Expiry Mechanics

MCX trades for long hours, which suits people with day jobs. The session typically runs from 9:00 AM to 11:30 PM for most non-agri commodities during Indian Standard Time. From around the start of November to the end of March, when US daylight saving time is off, the close usually moves earlier to about 11:55 PM or as notified. Agricultural commodities close earlier, around 5:00 PM. These long hours exist because metals and energy track international markets like Comex and Nymex, so MCX stays open while those Western markets are active.

Expiry on MCX is mostly monthly, unlike equity index options on the NSE which have weekly expiries. Different commodities expire on different dates of the month. Gold and silver contracts generally expire on the 5th of the contract month (adjusted for holidays), while crude oil and natural gas often expire a few days before the underlying US contract settles. Base metals have their own monthly expiry dates. Always check the contract expiry on your trading platform, because rolling over a near-expiry position at the wrong time can cost you in spreads and, for deliverable contracts, can trigger delivery obligations you did not intend.

Many MCX contracts are now compulsory delivery or delivery if both parties intend at expiry. Gold and silver in particular can go to physical delivery. As a retail cash speculator you almost never want delivery, so close or roll your position well before the expiry and delivery intention window. If you hold an open deliverable position into the delivery period, you can be assigned a delivery obligation with hefty additional margins and logistics you are not set up for.

Hedging Versus Speculation on MCX

MCX serves two very different users. Hedgers are businesses with real exposure to a commodity: a jeweller who holds gold stock, a refiner exposed to crude, an exporter worried about copper costs. They use futures to lock in a price and remove uncertainty, not to make a profit on the derivative itself. If their physical position loses value, the futures position gains roughly the same, and vice versa. The futures market exists primarily to make this risk transfer possible.

Speculators, including most retail traders, take a view on price direction to profit from the move. They provide the liquidity that hedgers need. There is nothing wrong with speculation, but it is a high-risk activity because of leverage. The same Rs 50 crude move that barely dents a hedger's overall business can be a large percentage of a retail trader's margin. Knowing which role you are playing keeps your expectations and your position sizing honest.

Choosing a Broker and an Account

To trade MCX you need a trading and demat-linked commodity account with a broker who is a SEBI-registered member of MCX. Verify the registration on the MCX or SEBI website rather than taking a marketing claim at face value. For active traders, brokerage structure matters: a flat per-order fee (often around Rs 20) is far cheaper than a percentage of turnover once your trade sizes grow. Compare the all-in cost including CTT, exchange fees, GST on brokerage, stamp duty and SEBI charges, not just the headline brokerage.

Beyond price, judge the platform itself. You want fast order execution, reliable live data, a stable mobile app, clear margin display, and good contract specification visibility so you can see lot size and tick value before you trade. Educational resources and clean contract notes for tax filing are a bonus. Avoid any tipster-style outfit promising assured commodity profits. In a leveraged market regulated by SEBI, guaranteed returns are a red flag, not a feature.

• Confirm the broker is a SEBI-registered MCX member before funding the account.
• Prefer flat per-order brokerage over percentage-of-turnover for active trading.
• Compute all-in cost: brokerage, CTT, exchange fee, GST, stamp duty, SEBI fee.
• Check the platform shows lot size, tick value and live margin clearly.
• Treat any promise of guaranteed commodity returns as a warning sign.

Common Mistakes Beginners Make on MCX

The single biggest mistake is misreading lot size and tick value, then taking a position far larger than the account can handle. A trader who thinks a standard Crude Oil lot is small finds out, after a normal Rs 150 swing, that they are down Rs 15,000 on one lot. Starting with Mini and Micro contracts solves most of this. The second mistake is trading without a stop loss in a market that can gap on overnight international news, since metals and energy react to US sessions while you sleep.

Other frequent errors include ignoring CTT and other charges so that small scalps that looked profitable were actually losing after costs, holding deliverable contracts into expiry by accident, and treating commodity profits as capital gains at tax time. Build a simple checklist before each trade: contract and lot size confirmed, tick value known, stop loss set, expiry checked, and the trade logged. That discipline separates traders who last from those who do not.

Sources and Further Reading

For authoritative data and the current contract specifications, lot sizes, tick sizes and tax rates, refer to MCX (Multi Commodity Exchange), SEBI (Securities and Exchange Board of India) and the Income Tax Department. Specifications and rates change, and the worked numbers above are illustrative, not forecasts. Always confirm current lot sizes, tick sizes, margins, CTT and tax rules on the official source before you place a trade.

Sources and Further Reading

For authoritative data and further reading on this topic, refer to MCX (Multi Commodity Exchange), SEBI (Securities and Exchange Board of India) and CBIC. Always confirm current rules, rates and contract specifications on the official source before you trade.