Hello Traders
Commodity trading is one of the oldest and most fundamental forms of trade in the world. Long before stocks and bonds came into being, farmers, traders, and kingdoms used to buy and sell goods like grains, metals, and spices. The first organized commodity exchange in the world is believed to be the Dojima Rice Exchange in Osaka, Japan, established in the 1730s. Even back then, people were trying to predict future demand and secure prices in advance, exactly what futures trading enables today.
Exchanges allow commodities to be traded via futures and options for price discovery, risk hedging, and liquidity. On international exchanges like CME and ICE, you can even find contracts for unusual commodities like cheese, lumber, eggs, and even weather. And this is no joke. In India, authorities permit many commodities to be traded on Indian exchanges, though only a few like gold, crude oil, silver, natural gas, metals, mentha oil etc, are actively traded.
Now, a new commodity joins this list: ELECTRICITY. We are excited to share that Electricity Futures will be live for trading on Dhan, available from day one for both MCX and NSE.
Here is the contracts specifications of electricity at MCX and NSE:
| Parameter | MCX Electricity Futures | NSE Electricity Futures |
|---|---|---|
| Symbol | ELECDMBL | ELECMBL |
| Trading Unit | 50 MWh | 50 MWh |
| Tick Size | Rs 1 per MWh | Rs 1 per MWh |
| Contracts Available | Current Month & Next 3 Months | Current Month & Next 3 Months |
| Contract Commencement Day | 1st business day of the launch month. A contract is launched 3months prior to the expiry month, as per launch calendar. | 1st business day of the launch month. A contract is launched 3months prior to the expiry month, as per launch calendar. |
| Last Trading Day | Business day immediately preceding the last calendar day of the contract expiry month. In case, it falls on a holiday, then the preceding a business day. | Business day immediately preceding the last calendar day of the contract expiry month. In case, it falls on a holiday, then the preceding a business day. |
| Settlement | Cash Settled | Cash Settled |
| Due Date Rate | DDR based on Volume Weighted Average of the DAM-UMCPs (Unconstrained Market Clearing Price) of the India Energy Exchange (IEX) of all the calendar days of the expiry month. | DDR based on Average of the DAM-UMCPs (Unconstrained Market Clearing Price) of PXIL (Power Exchange of India Ltd) of all the calendar days of the expiry month. |
| Launch Date | July 10, 2025 | July 14, 2025 |
Electricity, as a commodity, is very different from other commonly traded items like gold, crude oil, or wheat. The key difference is that electricity cannot be stored easily. Unlike grains that can be kept in warehouses or oil that can be stored in tanks, electricity must be consumed the very moment it is generated. There is no buffer or stockpile to fall back on. This makes electricity highly time-sensitive and dynamic in nature.
The demand for electricity also changes every hour. During peak hours, like in the morning when households are active or in the evening when industries and homes are both running, the demand shoots up. On the other hand, during late-night hours or holidays, the demand falls. This constant shift in consumption means electricity prices are always moving.
In addition to this, supply can also vary based on raw material needed like coal or weather conditions like wind and sunlight, especially as more renewable sources like solar are becoming part of the grid. I am sure you must have heard about Pradhan Mantri Surya Ghar Yojna. While renewables help with sustainability and cost-efficiency, they also introduce variability, since sunlight and wind are not available all the time. Industrial usage, temperature variations, rainfall, and unexpected power plant outages also affect supply and demand. This unpredictability creates more price fluctuations and brings in the need for market participants to manage risk better.
This is where electricity futures come in. Electricity Futures are contracts traded on exchanges that allow buyers and sellers to lock in the price of electricity for a future date. These contracts are standardised and regulated. For example, if an industrial company knows it will need a fixed amount of electricity next month, it can buy a futures contract today to lock in the rate and protect itself from future price rises. Similarly, a power producer can sell futures to secure its revenue ahead of time, avoiding the risk of prices falling.
You may be wondering, how is electricity even traded like a commodity? Unlike gold or wheat, you can’t touch it, store it in a warehouse, or carry it in a truck. So how can something like electricity be exchanged or measured? That’s a fair question.
Electricity is measured using a unit called megawatt-hour, often written as MWh. This is a unit of energy that tells us how much electricity is used over time. One megawatt-hour simply means one megawatt of power used continuously for one hour.
Let’s take an example. Imagine a large factory that runs heavy machines. If the total power required to run that factory is one megawatt, and it runs for one full hour, then it has consumed one megawatt-hour of electricity. If the same factory runs for 10 hours at the same power level, it will consume 10 megawatt-hours. This makes it easy to calculate and trade electricity in fixed quantities, just like other goods. So when electricity is traded on an exchange, it is not traded as a flow that keeps moving in wires. It is traded in the standard blocks of energy (in our case, 50 MWh), which represent the amount of electricity to be delivered or settled over a specific time. This standardisation makes it possible for buyers and sellers to agree on price and volume, just like in any other futures contract.
The value of electricity futures is based on a benchmark that reflects the actual market price of electricity. For MCX, the benchmark is the Day-Ahead Market (DAM) price discovered on the Indian Energy Exchange (IEX). This price is referred to as the Unconstrained Market Clearing Price (UMCP). It represents the ideal price of electricity in a situation where there are no physical limitations or congestion in the transmission grid. This gives a fair and transparent view of the supply and demand of electricity across the country.
For NSE, the benchmark used is also based on the Day-Ahead Market, but it is taken from Power Exchange India Limited ( PXIL). Like IEX, PXIL also runs an organised electricity market where prices are discovered based on bids and offers from buyers and sellers. The final settlement price for electricity futures on NSE is calculated using the volume-weighted average of the UMCPs published by PXIL for the contract period.
Both exchanges use data from these regulated power markets to ensure that the futures contracts are settled in a way that closely reflects the real electricity prices in the country. This helps participants in the electricity ecosystem, like producers, distributors, and large consumers, hedge their price risks and plan better for the future.
In summary, electricity as a commodity is real-time, complex, and rapidly evolving. And now, with electricity futures available on Indian exchanges like MCX and NSE, market participants finally have the tools they need to trade and manage this essential resource effectively.
The contracts are designed to replicate base load electricity consumption—meaning the constant level of demand that must be met round the clock. This makes the futures relevant not just for energy producers, but also for large industrial consumers, power distribution companies, and even informed speculators seeking price exposure to India’s evolving energy markets
Electricity Futures will be available for trading on Dhan, from day one of its launch. As always, all your favourite features - trade on charts, strategy builder, live market depth, special order types, alerts etc… are enabled from the very start.
Start exploring and trading Electricity Futures on Dhan. This is the real trading. And it just got more electrifying.
Naman