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EQUITY - MARKET SCREENER

Multi Commodity Exchange of India Ltd
Industry :  Miscellaneous
BSE Code
ISIN Demat
Book Value()
534091
INE745G01035
293.4705882
NSE Symbol
P/E(TTM)
Mar.Cap( Cr.)
MCX
50.97
7822.13
EPS(TTM)
Face Value()
Div & Yield %
30.09
10
1.8
 

As on: Jan 22, 2022 08:18 PM

Dear Shareholders,

The Board of Directors are pleased to present the Nineteenth Annual Report on the business and operations of your Company, along with the Audited Statement of Accounts and the Auditors' Report, for the Financial Year (FY) ended March 31,2021 ('year under review'). The highlights of this Annual Report are given below:

FINANCIAL RESULTS

The Company's financial performance for the year ended March 31,2021 is summarized below:

(Rs. in lakh, except EPS)

Particulars Standalone Consolidated
2020-21 2019-20 2020-21 2019-20
Total Income 45,542 48,177 49,434 50,311
Total Operating Expenditure 20,418 22,514 20,543 21,948
Profit before Interest, depreciation, exceptional items and tax 25,124 25,663 28,891 28,363
Less: Depreciation 2,164 1,784 2,206 1,814
Less: Interest 22 20 19 16
Add: Share of Profit of Associate - - 9 4
Profit after exceptional items and Share of Profit of Associate but before tax 22,938 23,859 26,675 26,537
Less: Provision for tax 4,156 3,007 4,153 2,887
Profit after tax 18,782 20,852 22,522 23,650
Add/(Less) : Other Comprehensive Income (net of tax) (97) (187) (94) (199)
Total Comprehensive Income for the period (Comprising Profit and Other Comprehensive Income for the period) 18,685 20,665 22,428 23,451
Earnings per share
i. Basic (Rs.) 36.90 40.98 44.25 46.48
ii. Diluted (Rs.) 36.90 40.98 44.25 46.48

GLOBAL COMMODITY MARKET

During the year 2020, the slump in economic activities due to the COVID-19 pandemic, created one of the worst recessions in the global economy in almost a century. It led to an unprecedented disruption in economic activities in almost all countries and required large financial support from governments to arrest the decline in GDP.

Nevertheless, global financial markets remained mostly resilient even in the face of the disruptive events prompted by the pandemic. In particular, the staggered reopening of global economies through the second half of 2020 and steady vaccination rollout thereafter, addressed investors' concern resulting in markets remaining largely unscathed during this period. Accommodative monetary and fiscal policy support by most central banks and governments enabled markets to rebound from the initial pandemic-induced disruptions. This led to many asset classes, including commodity derivatives, to perform well, overcoming the negative effects of the pandemic. As a result, global commodity markets witnessed a robust growth in volumes during 2020 across all the segments, barring the non-precious metals including ferrous and non-ferrous metals i.e. every metal except gold, silver, platinum, palladium and diamond. According to data released by the Futures Industry Association (FIA), aggregate global volumes of exchange traded commodity derivatives rose steeply by about 33% in 2020 from 2019.

According to the IMF's latest World Economic Outlook, the global economy is expected to expand by about 6% in 2021, largely on strong rebounds from a few major economies. However, many emerging markets and developing economies continue to struggle with the COVID-19 pandemic and its aftermath. These economies are grappling with slow progress in vaccination and resurgence of cases with mutation of the virus. The prospects for global economic growth may face headwinds such as these.

Your Company's performance during the FY 2020-21 and outlook during 2021-22 may be analysed against this backdrop.

GLOBAL PANDEMIC - COVID-19

The World Health Organization declared Novel Corona virus disease (COVID-19) a global pandemic on March 11, 2020. Subsequently, on March 24, 2020, the Government of India announced a nationwide lockdown for 21 days to contain spread of COVID-19. Thereafter, the national level lockdown was extended multiple times, followed by gradual relaxations and was eventually phased out. However, various state governments extended COVID-19 related curbs with certain relaxations depending on the pandemic scenario in their states.

The Company remained functional during FY 2020-21 as the Exchange related services were classified under 'essential services' and thus, exempted from lockdown restrictions. The Exchange, by and large, adopted 'Work from Home' policy ever since the onset of pandemic and only minimal critical staff have been operating from office premises. The Exchange has also put in place social distancing norms and other measures such as mandatory masks, restricted visitors entry, virtual meetings, sanitized workplaces, safe physical distancing, thermal screening at entry points, availability of hand sanitizers at entry/exit points and common places, awareness campaign, etc. to contain the spread of the pandemic at the workplace. During the early days of nationwide lockdown, trading hours in the commodity derivatives market were truncated to 5 p.m. from 11.30/11.55 p.m. As a result, the Average Daily futures Turnover (ADT) on the Exchange dropped to ' 15,658 crore in April 2020 vis-a-vis ' 26,356 crore during the corresponding month of fiscal year 2019-20. Nevertheless, it soon recovered after restoration of the normal trading hours for non-agricultural commodities (w.e.f. April 23, 2020). The ADT rose to ' 23,765 crore and ' 28,633 crore, respectively, during months of May 2020 and June 2020.

The operations of member brokers had also been adversely affected during the lockdown due to restrictive movements and dampened sentiments. Likewise, lockdown caused disruptions in the physical market for commodities, availability of spot prices, warehousing operations and logistics infrastructure including availability of labor. At present, normalcy of operations/ services at all designated warehouses has been restored.

FINANCIAL HIGHLIGHTS

During FY 2020-21, the ADT* of commodity futures contracts stood at ' 31,595 crore during FY 2020-21 vis-a-vis ' 32,550 crore in FY 2019-20, a decline of 2.9%. The Average Realization Rate (ARR) decreased to ' 2.07 per lakh during FY 2020-21 from ' 2.10 per lakh during the previous year. Significantly, the exchange's traded Unique Client Codes (UCC - PAN based*) during FY 2020-21 increased to 4.666 lakh from 4.039 lakh.

The total turnover of commodity futures traded on your Exchange stood at ' 80.25 lakh crore in FY 2020-21 as against ' 83.98 lakh crore during FY 2019-20, a decline of 4.44% largely due to reduced number of trading days/hours owing to restrictions posed by COVID-19 pandemic during Q1 FY 2020-21. The Bullion futures turnover increased by 54 per cent to ' 44.84 lakh crore from ' 29.15 lakh crore during the previous year. The Bullion segment's turnover of ' 50,226.37 crore on July 28, 2020 was the highest achieved, after the introduction of CTT w.e.f. July 01,2013. Turnover in the Energy contracts declined to ' 18.25 lakh crore from ' 38.13 lakh crore in FY 2019-20 on account of incidence of higher margins in Crude Oil contracts, pursuant to its price falling in negative territory in April 2020. The turnover in base metals totaled ' 15.66 lakh crore in FY 2020-21 as against ' 15.68 lakh crore in FY 2019-20. A total of 59,848 metric tonnes of Base Metals was delivered through the exchange mechanism during FY 2020-21. Agriculture futures turnover remained steady during FY 2020-21 at ' 1.01 lakh crore compared to ' 1 lakh crore for the previous year.

During FY 2020-21, your Company's market share in commodity futures market has increased to 96.04% as against 94.01% in the previous year. The volume (in terms of commodity futures contracts traded on the Exchange) decreased by 31% in FY 2020-21, to 204 million lots, as compared to 295 million lots traded in FY 2019-20. This is consequent to discontinuation of multiple contract variants in Crude Oil and Metal contracts, in compliance with SEBI directives.

For FY 2020-21, your Company's (Standalone) total income stood at ' 45,542 lakh as compared to ' 48,177 lakh during FY 2019-20. The operating income during the year under review was ' 34,485 lakh as against ' 37,044 lakh in FY 2019-20. Net profit after tax in FY 2020-21 was ' 18,782 lakh as compared to ' 20,852 lakh in FY 2019-20.

In accordance with the provisions of the Income Tax Act, 1961, the effective rate of taxation remained the same as previous year i.e. 25%. Further, the Company has also utilized MAT credit in FY 2020-21.

The net worth of the Company as at March 31,2021 stood at ' 1,58,036 lakh.

SHARE CAPITAL

There has been no change in the share capital of your Company during the year under review. As on March 31,2021, the paid-up share capital of your Company stood at ' 5,099.84 lakh comprising 50998369 Equity shares of ' 10 each fully paid. Your Company has, during the year under review, neither issued any Equity shares with differential voting rights nor any shares (including sweat equity shares) to its employees under any scheme.

TRANSFER TO RESERVES

For the year ended March 31, 2021, your Directors do not propose to transfer any amount to the General Reserve. An amount of ' 1,18,536 lakh is proposed to be retained as surplus in the Profit and Loss Account.

DIVIDEND

Pursuant to Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as the SEBI Listing Regulations, 2015), your Company had formulated a Dividend Distribution Policy which is available on the Company's website at https://www.mcxindia.com/docs/default-source/investor-relations/corporate- governance/dividend-distribution-policy iulv2020.pdfRS.sfvrsn=c9a29890 2.

The Board of Directors of your Company have recommended a dividend of ' 27.60 (276%) per equity share on a face value of ' 10 per share for the financial year ended March 31,2021, subject to the approval of shareholders at the ensuing Annual General Meeting.

The outgo on account of the proposed dividend of 276 % (Previous Year 300%) to be paid by the Company aggregates to approximately ' 14,076 lakh, being a payout of 75% of the profit after tax (PAT) for the year ended March 31,2021, as against ' 15,300 lakh during the previous year.

Your Directors have recommended the dividend based on the Company's performance and in view of the adequacy of existing cash / cash equivalent at its disposal to provide for capital expenditure on technology development and new business initiatives.

DEPOSITS

Your Company had not invited any deposits from the public, and as such, no amount of principal or interest related thereto was outstanding as on March 31,2021.

PARTICULARS OF LOANS GIVEN, INVESTMENTS MADE, GUARANTEES GIVEN OR SECURITY PROVIDED UNDER SECTION 186 OF THE COMPANIES ACT, 2013

The details of loans, guarantees and investments under the provisions of Section 186 of the Companies Act, 2013 read with the Companies (Meetings of Board and its Powers) Rules, 2014, as on March 31,2021, are set out in Note 46 to the Standalone Financial Statements of the Company.

BUSINESS OPERATIONS

The Company is an affiliate member of the International Organisation of Securities Commissions (IOSCO), which is an international body that brings together the world's securities regulators and is recognised as the global standard setter for the securities sector. The Exchange is also an associate member of Futures Industry Association (FIA) which is a leading global trade organisation for the futures, options and centrally cleared derivatives market.

The Exchange is ranked amongst top 7 global commodity futures exchanges, based on traded volume in commodity futures in the Calendar Year 2020 (CY20). (Source: FIA Annual Volume trading statistics January 2021).

With an aim to seamlessly integrate with the global commodities ecosystem, the Company continues to have strategic alliances with leading international exchanges viz. CME group, Dalian Commodity Exchange (DCE), London Metal Exchange (LME), Mozambique Commodities Exchange (BMM), Taiwan Futures Exchange (TAIFEX) and Zhengzhou Commodity Exchange (ZCE). The Company has also tied up with various trade bodies, corporates and educational institutions across the country to improve trade practices, increase awareness, and facilitate overall improvement of the commodity market ecosystem.

Product Segment Highlights Bullion

In pursuit of the Atmanirbhar Bharat mission, the Company has embarked upon the path of recognizing domestic bullion refiners for good delivery of Gold on Exchange platform.

The Exchange empaneled two Indian refiners for delivery of Gold under the existing contract specifications of Gold Mini (100 grams) futures with effect from March 06, 2021.

Accordingly, for the first time, the delivery of 190 kg Indian refined Gold was made in the Gold Mini April 2021 futures contract.

As per SEBI directives, the Exchange aligned the trading unit and delivery unit of Silver Mini contract to 5 kg from June 2020 contract onwards, from the earlier trading unit and delivery unit of 5 kg and 30 kg respectively. Thereafter, Silver Mini (5kg) contract saw successful delivery of 3600 kg in its first-ever delivery cycle and has seen successful delivery of 25740 kg during the FY 2020-21.

The Bullion segment attained various landmarks during FY 2020-21:

The Bullion turnover recorded a high of ' 50,226 crore on July 28, 2020, the highest in last seven years. Silver (all variant) turnover of ' 33,239 crore recorded on July 28, 2020 and Silver (all-variant) volume of 5469 MT seen on July 22, 2020 were both seven and half year highs. Further, in FY 2020-21, the Company set a twelve-year high for Silver delivery in a single contract, with 140 MT being delivered in the September 2020 contract. Similarly, in FY 2020-21, Silver deliveries for all variants put together, witnessed highest annual number since inception, of 517.7 MT.

Further, Silver Options (30 kg), turnover and volume hit an all-time high of ' 741 crore and 111 MT on August 26, 2020 and also, registered an Open Interest of 172 MT hitting an all-time high on August 17, 2020.

Gold Petal futures contracts saw successful delivery of 36.4 kg (36438 coins), since its launch in October 2019.

A product profile for Bullion has been hosted on the website of the Company to help investors understand the physical market dynamics which influence the trading on the Exchange.

Energy

The global economic and industry slowdown shutdown on account of COVID-19 resulted in unprecedented price movements in energy markets. Declining crude oil demand and global supply glut, combined with huge shortage in storage capacity dented the crude oil prices and for the first time recorded history, NYMEX's WTI Crude oil prices swirled down to negative terrain (-$37.63/bbl on April 20, 2020).

The Exchange undertook various risk management measures such as introducing additional margins, slab based margins and also added a negative price trading feature in the system to be prepared for any kind of untoward movement in the energy commodity prices.

The volume and turnover of the Company Crude Oil Contract was severely impacted by COVID-19 lockdowns, reduced trade timings and negative crude oil prices. The Company's Crude Oil futures contract's average daily turnover was down to ' 2,796 crores in FY 2020-21, from ' 11,303 crore in FY 2019-20. The average daily turnover of the Company crude oil options contract also saw a decline of 61% to ' 188 crore in FY 2020-21, from ' 482 crore in FY 2019-20.

Further, the volumes were also impacted due to stringent risk management measures undertaken in terms of higher margins, which went up as high as 130% and were then gradually brought down to 20% in February 2021.

The natural gas futures contract garnered good volume and traction by clocking an average daily turnover of ' 4,361 crore in FY 2020-21, compared to an average daily turnover of ' 1,774 crores in the previous financial year. Further, on February 17, 2021, the Company's natural gas futures contract recorded highest daily turnover (since December 2018) of ' 10,053 crore.

Agricultural basket

The ADT in Agri commodities in FY 2020-21 has been higher (' 397 crore) compared to the previous FY 2019-20 (' 391 crore). The Exchange launched a new commodity in the Agriculture basket i.e. Rubber contract (1 MT) on December 28, 2020. The participation has been good and the Exchange is striving to achieve new milestones in the current financial year. Rubber contract saw deposits of 837 MT by the end of FY 2020-21.

The Crude Palm Oil (CPO) also recorded highest annual turnover since introduction of CTT in FY 2020-21 of ' 84,593 crore. The Cotton contract has gained significant traction and the Exchange has achieved highest deposits of 2,26,175 bales (1 bale = 170 Kgs) in the FY 2020-21.

The evening trading hours for international referenceable agricultural commodities (Cotton, Crude Palm oil, Kapas and RBD Palmolein) was revised w.e.f April 23, 2020 due to COVID-19 and its consequential lockdown. The trade end time was reduced from 9 p.m. to 5 p.m. The same was restored w.e.f. June 02, 2020.

Base Metals

Aluminium, Zinc, Nickel, Lead and Copper contracts were converted from cash settled to delivery settled as directed by the Regulator. The trading units and delivery units were aligned to ensure that there were no issues like odd lot treatment in the contracts.

The delivery-based mechanism for these contracts has given an opportunity to the base metals industry in India to not only manage their price risk, but also use the Exchange platform to give and take deliveries. In all, delivery of 59,848 MTs for all five metals put together, went via the Exchange settlement in FY 2020-21.

Delivery based contracts allowed the holder of metals to deliver on MCX when there was no offtake in physical market on account of disturbances caused by pandemic. The Exchange worked out to be the perfect platform for delivery-of-last- resort.

As demand picked up post the peak lock down phase, metal also moved out of the warehouses seamlessly.

The primary delivery centre for Aluminium was moved to Raipur from Thane, while Thane continued to be an additional delivery centre. Additional grades of T-bars and Sows were also added in the aluminium futures contract.

In pursuit of the Atmanirbhar Bharat mission, the Company has embarked upon the path of branding domestic Refined Lead Producers to facilitate their direct participation in price discovery and good delivery on Exchange platform.

Index Futures

Subsequent to SEBI approval, the Exchange had launched MCX iCOMDEX Bullion (BULLDEX) and Base metal (METLDEX) index futures contracts, respectively on August 24, 2020 and October 19, 2020. The contracts witnessed encouraging participation from market stakeholders. The average daily turnover# during FY 2020-21 for index futures on MCX BULLDEX and MCX METLDEX was ' 263.10 crore and ' 66.20 crore respectively.

The Exchange also started disseminating index values for MCX iCOMDEX Energy Index (ENRGDEX) that represents energy sector with effect from October 29, 2020. The Crude Oil and Natural Gas futures form the underlying constituents for the said index.

Transaction fees

To develop market depth and liquidity in far month contracts and encourage participation across commodity segments on the Exchange, the Exchange levied flat transaction fees of ' 130 per crore of turnover in far month futures contracts during the financial year 2020-21. Further, to encourage options trading, the Exchange continued to waive transaction fees on all commodity options contracts during FY 2020-21. Also, to encourage index futures trading, the Exchange waived transaction fees on MCX iCOMDEX Index futures till March 31,2021.

The Company had introduced Liquidity Enhancement Scheme (LES) in Gold Mini options (in Goods) for the period from September 01,2020 to December 10, 2020, and incurred an expense of around ' 135 lakh under the scheme. The scheme was aimed to provide continuous two-way quotes for important strike prices of both call and put option contracts to generate initial liquidity in the contract. Thereafter, the said scheme was discontinued as it failed to meet the desired objective.

Market Participants

As on March 31,2021, the Company has a national reach with 636 members, having 52,777 Authorised Persons, operating through 38.92 lakh terminals connected through various available modes of connectivity (including Computer to Computer Link (CTCL), Internet Based Trading and Wireless Trading) across 1,016 cities/towns across India.

The unique traded client codes (UCC - PAN based*) which is of significant importance to Exchange, witnessed a jump from 4.039 lakh in FY 2019-20 to 4.666 lakh in FY 2020-21.

Consequent to the Reserve Bank of India (RBI) permitting subsidiaries of banks to offer broking services for commodity derivatives segment of SEBI recognised stock exchanges, eight bank (broking) subsidiaries were registered with the Exchange during FY 2020-21.

On the institutional front, 2 Mutual Funds have started to participate in commodity derivatives and the exchange has on boarded 2 Portfolio Management Service providers and 1 EFE. Further, 3 custodians are providing custodial services in commodity derivatives segment.

REGULATORY DEVELOPMENTS

During the year under review, SEBI, the sectoral regulator relaxed the timelines for compliance with various regulatory requirements for trading members / clearing members and listed companies due to the COVID-19 pandemic. SEBI has strengthened mechanism thereby ensuring adequate compensation to the non-defaulting counter party in the commodity derivatives segment by standardizing the delivery default norms.

The important Regulatory developments during FY 2020-21, primarily by SEBI, are as hereunder:

 

April 2020

i. To allow ease of doing business in the securities market, SEBI decided to make use of technological innovations, which can facilitate online KYC. Investor's KYC can be completed through online KYC process and Video in person verification.

May 2020

ii. Permitted reporting entities as recommended by UIDAI, subject to compliance of the conditions, to undertake e-KYC Aadhaar Authentication service of UIDAI in Securities Market.

iii. In continuation to the circular dated February 25, 2020, the implementation of Margin obligations to be given by way of Pledge / Re-pledge in the Depository System, has been extended till August 01,2020 and holding of Power of Attorney by Trading Member (TM) / Clearing Members (CM) not to be considered as equivalent to the collection of margin by TM / CM in respect of securities held in the demat account of the client, is applicable from August 01,2020.

Further, issued circular extending timelines on July 29, 2020 allowing the system of parallel acceptance of the client securities by way of title transfer up to August 31,2020 and TM/CM may continue to hold funded stocks in 'Client Margin Trading Securities Account' till August 31,2020.

iv. To bring in uniformity in the guidelines to be followed by the Stock Exchanges, laid down criteria for identification and selection of a location as a delivery centre.

v. Halved the broker turnover fee for the period June, 2020 - March, 2021 in its efforts to help market participants to tide over challenges due to COVID-19. The current applicable rate is ' 10 per crore for non-agricultural commodities.

June 2020

vi. Mutual fund schemes cannot invest in physical goods in commodity derivatives except in 'Gold' that too through Gold ETFs.

vii. Relaxed provision for Mutual Funds for holding physical gold and silver up to 180 days from 30 days.

July 2020

viii. To harmonise the action amongst all Stock Exchanges/Clearing Corporations/Depositories in a time bound manner, SEBI has prepared Standard Operating Procedure(SOP) in the cases of Trading Member(TM ) / Clearing Member (CM) leading to default, to protect the interest of non-defaulting clients of a TM and /or non-defaulting clients / TM(s) of the CM. SOP has outlined actions to be taken by respective market participant or MII within a given time frame after detection of the early warning signals/other triggers until declaration of defaulter of TM / CM by the Stock Exchange / Clearing Corporation. It also covers forensic audit by Initiating Stock Exchange (ISE).

ix. Repealed the eligibility criteria for selection of commodity futures contract, as underlying for options shall be amongst the top five futures contracts in terms of total trading turnover value of previous twelve months.

x. That the Exchanges/ CC(s) shall adopt the specified upfront margin collection framework to enable verification of upfront collection of margins from clients in cash and derivatives segments, the applicable upfront margins are required to be collected from the clients in advance of the trade.

xi. Members to review the client shortfall from two perspectives based on (a) EOD margin obligation and (b) Peak margin obligation during the day. Further, higher of (a) and (b) to be considered for levying of penalty as per the extant framework. The peak margin obligation of client shall be adopted in a phased manner, as given below:

Phase I- 25% (for 3 months from the date of implementation i.e up to 28.02.2021),

Phase II- 50% (for subsequent 3 months i.e up to 30.05.2021),

Phase III- 75% (for subsequent 3 months i.e up to 31.08.2021)

Phase IV 100% (w.e.f 01.09.2021) to compare the shortfall with peak margin for respective client and differential shortfall as allowed for respective phase can be funded by TM own funds.

Members to ensure changes in trading, risk management, surveillance systems to integrate peak margin related reporting. Provisions of this circular are effective from December 01,2020

August 2020

xii. Guidelines for execution of Power of Attorney (PoA) by the client favouring Broker and/or DP. It is reiterated that PoA is optional and not be insisted. PoA can be used for Stock Exchange related settlement obligation and for pledging / re-pledging of securities in favour of TM/CM margin requirements. Also all off-market transfer of securities will be only by execution of Physical DIS duly signed by the client himself or by way of electronic DIS.

September 2020

xiii. Stock Exchange (SE) and Clearing corporations (CC) to initiate suitable actions for liquidating the assets (movable and immovable) of defaulter member including that of debit balance clients (to the extent of debit balance), within six months of declaration of defaulter, for recovery of the assets not in possession of the SE/CC, before appropriate court of law.

October 2020

xiv. Stock Exchanges created a separate fund out of the Regulatory Fee as permitted by SEBI to utilize the fund exclusively for the benefit of and easy participation by Farmers/Farmers Producers Organisations (FPOs) in the agricultural commodity derivatives market. FPOs have been intimated of the details of the fund for their active participation on the Exchange platform and benefit from the support extended by the fund.

November 2020

xv. To further strengthen the Investor Grievance Redressal Mechanism, issued certain clarification w.r.t. Resolution of complaints by Stock Exchange (Timeline, Service related complaints, Complaints to be referred to IGRC), handling of complaints by IGRC and Arbitration.

xvi. Regarding testing of Software used in or related to Trading and Risk Management, it was decided that requirement of mandatory mock trading sessions to facilitate testing of new/existing software having changes of functionality shall be optional only if the Exchange provides a suitable simulated test environment to test such software.

December2020

xvii. In view of the situation arising due to COVID-19 pandemic and nationwide lockdown imposed by the Government and representations received from Stock Exchanges, relaxations were provided in timelines for compliance with various regulatory requirements to trading members / clearing members, depository participants, RTAs / issuers, KRAs, stock brokers and listed entities by December 31,2020 and for submission of Cyber Security and Cyber Resilience Audit for half year ended on September 30, 2020 by members is extended up to January 31,2021.

January 2021

xviii. Advised all exchanges regarding refund of security deposit on Surrender of membership by Trading Members on approval of surrender of TM's registration by SEBI, the Exchange shall release Security Deposit (SD) of the TM in the following manner:

• If TM engaged in trading on behalf of clients, then security deposit will be released after a period of 3 years from the date of receipt of surrender application by Exchange from the TM , or 5 years from the date of disablement of TM's trading terminals by the Exchange whichever is earlier.

• If TM is engaged only in proprietary trading in last 3 years prior to the date of application, then deposit will be released after 1 year from the date of receipt of surrender application by exchange or 3 years from the date of disablement of TM's trading terminals by the Exchange whichever is earlier.

xix. Revised the norms for Daily Price Limits (DPL) for commodity futures contracts (excluding Index Futures and Options).

xx. Norms issued for Investment and disclosure by Mutual Funds in Exchange Traded Commodity Derivatives (ETCDS)

March 2021

xxi. Decided that the Code of Conduct and Institutional Mechanism for prevention of fraud or market abuse shall be applicable to Stock Exchanges, Clearing Corporations and Depositories, to ensure accountability of the management / designated persons in case of negligence / failure.

xxii. Directed Registered Intermediaries (RIs) to upload the KYC records of Legal Entities (LE) accounts opened on or after April 01,2021 on to CKYCR as per the provision of the Prevention of Money Laundering (Maintenance of Records) Rules, 2005. The provisions of this circular are not applicable to Foreign Portfolio Investors (FPIs).

xxiii. In view of the advancement in technology, improved automation of processes and with a view to reduce the time period specified for moving from the Primary Data Centre (PDC) to the Disaster Recovery Site (DRS), modified framework for Business Continuity Plan (BCP) and Disaster Recovery (DR) of MIIs was laid down. The important modifications are given below:

a. Constitute an Incident and Response team (IRT)/ Crisis Management Team (CMT)

b. MIIs should test such switchover functionality by conducting unannounced live trading from its DRS for at least 1 day in every six months.

c. Unannounced live trading from DRS of MIIs shall be done at a short notice of 45 minutes.

d. MII shall, within 30 minutes of the incident, declare that incident as 'Disaster' and take measures to restore operations including from DRS within 45 minutes of the declaration of 'Disaster'

e. Accordingly, the Recovery Time Objective(RTO)- the maximum time taken to restore operations of 'Critical Systems' from DRS after declaration of Disaster- shall be 45 minutes.

RISK MANAGEMENT AND RISK MANAGEMENT POLICY

Your Company has put in place an Enterprise Risk Management ("ERM") framework to enable and support achievement of business objectives through identification, evaluation, mitigation and monitoring of risks applicable to your Company. Your Company has a comprehensive Risk Management Policy for managing risks such as Regulatory & Compliance risks, Technology risks, Business risks, Operational risks, Credit risks and Market risks, People risks, Cyber Security risks, Legal risks, Reputational risks and Black swan events related risks. The Risk Officer reviews the Internal Audit Report(s) and suggests measures to improve the controls.

The Board of Directors have constituted a Risk Management Committee (RMC) for, inter alia, identification, measurement and monitoring the risk profile of the Exchange. As on March 31,2021, the Risk Management Committee comprised of three Public Interest Directors and an Independent External Expert. The Risk Management Committee periodically reviews the Risk Management Policy and its implementation thereon, as well as, the Risk Register which also includes observations from Internal Audit. The Committee also periodically examines and evaluates the Risk Management Information Systems (RMIS) covering existing as well as emerging risks. The risks in relation to internal control over financial reporting is reviewed by the Audit Committee.

For details relating to 'Risks and Concerns' of your Company please refer the Management Discussion and Analysis forming part of this Annual Report.

INVESTOR PROTECTION FUND (IPF) AND INVESTOR SERVICE FUND (ISF)

Your Company has set up Multi Commodity Exchange Investor Protection Fund (IPF), to protect and safeguard the interest of investors/ clients, in respect of eligible/legitimate claims arising out of the default of a member on the Exchange. The interest income on investment of surplus funds of IPF is used for imparting investor/ client education, awareness, undertaking research activities or such other programs as may be specified by SEBI.

Currently, the applicable IPF compensation limit is ' 25 lakh per client, with no member-wise limit for SEBI-registered members declared defaulter on or after January 24, 2018. Further, the limits of ' 2 lakh per investor per defaulter member and ' 200 lakh per defaulter member shall continue to be applicable for claims against members, declared defaulter prior to January 24, 2018 and for non-SEBI registered members.

As on March 31,2021, the corpus of IPF stood at ' 20,479 lakh. Your Company has also set up an Investor Service Fund (ISF) for providing basic minimum facilities at various Investor Service Centres. The Company has set up 10 Investor Service Centres across India till date. SEBI has permitted the exchanges to utilize the corpus of ISF for conducting various investor education and awareness programs, capacity building programs and maintenance of all price ticker boards installed by the exchanges, cost of training of arbitrators and grievance redressal committee members, etc. In addition to above, the corpus may be utilized in any other manner as prescribed/permitted by SEBI in the interest of investors from time to time.

Your Company has transferred 1% of the turnover fees charged from its members on a monthly basis to ISF. As on March 31, 2021, the corpus of ISF stood at '845.98 lakh. Considering the recent origin of ISF and its corpus being inadequate, SEBI had permitted utilization of interest on IPF, to pursue activities of ISF for a period of 3 years starting from April 01,2018. However, your company has not utilised interest income of IPF for the activities to be conducted under ISF.

In-order to enhance literacy and to promote investor education and awareness in the commodity derivatives market, over 400 awareness programs/ webinars were conducted under the banner of MCX IPF and ISF in FY 2020-21. Out of these programs/ webinars, over 70 programs were regional webinars conducted jointly with SEBI. In the wake of the COVID-19 pandemic, the Exchange has initiated most of the awareness programs through webinars while a few awareness programs were done with physical presence of participants in the interiors. These awareness programs / webinars were conducted across India, for investors, students, hedgers, physical market participants/ stakeholders from the bullion/ metal industries, energy markets and agricultural sector including farmers, farmer producer organisations (FPO's) and also for micro small and medium enterprises (MSME's), corporates, etc.

As per directions received from SEBI, at least 1/3rd of the awareness programs under IPF and ISF were conducted for FPO's and MSME's during the period August 7, 2020 to March 31,2021.

Some major awareness initiatives in FY 2020-21 were as follows:

i. World Investor Week (WIW) was celebrated from November 23, 2020 - November 29, 2020 throughout India under the aegis of SEBI & IOSCO.

- 100 awareness programs/ webinars were conducted during WIW, which had around over 5200 participants.

- 'Ring the Bell Ceremony' was conducted as a part of the World Investor Week 2020 on 24th November 2020 in the presence of Chief Guest, Shri G. Mahalingam, Whole-Time Member, SEBI and Guest of Honour, Shri G. P. Garg, Executive Director, SEBI and Mr. P. S. Reddy, MD & CEO, MCX. The Commodity Insights Yearbook 2020 created in partnership with the National Institute of Securities Markets (NISM) was also launched during the 'Ring the Bell' Ceremony.

- Quiz competition with over 1800 registrations and 373 participants and Slogan Competition with 219 participants was held each day and awards were distributed to winners.

- Under the "SMS-WhatsApp Campaign", Awareness Creatives were sent to over 24,300 individuals each day through SMS.

- As a special focus on creating awareness amongst the farmers during the World Investor Week, where 37 awareness programs with physical presence of farmers in the State of Gujarat were conducted, while maintaining social distancing and local government norms.

- Investor Awareness camps with 3 different TV channels were conducted.

ii. Awareness programs were conducted with several prominent Institutes and Associations under the aegis of IPF and ISF including Institute of Company Secretaries of India, IMC Chamber of Commerce and Industry, Indian Institute of Materials Management, Indian Electrical and Electronics Manufacturing Association (IEEMA-South), All India Cotton Seed Oil Industries Association, Indian Transformer Manufacturers Association (ITMA), Bullion and Jewellers Association of Assam, Textile Association India, Indian Institute for Production Management (IIPM), Indian Institute of Plantation Management (IIPM), various State and National Universities.

Awareness through Media channels:

Investor awareness through media activities form an integral part of MCX IPF's investor awareness initiatives. The objective is to spread mass awareness and educate commodity market stakeholders. During FY 2020-21, a number of investor awareness activities were carried out in partnership with organizations such as-Network18 Group-TV18 and CNBC Awaaz, Zee Business, Hindu Business Line, Financial Express, Business Standard, Mint, Times Group and Outlook Money magazine across digital, electronic and print modes. MCX IPF knowledge series camps/webinars were conducted on digital platforms and the recorded episodes of the panel discussions were telecast on TV channels like ETNOW, CNBCTV18 and Zee Business. These were made available on the YouTube channel of the Exchange. Besides these, a commodities knowledge series was started in the print and electronic media, namely, ET in a Classroom in Economic Times and Commodities Trade on CNBCTV18 respectively.

In order to reach the masses at regional levels, the Monk Who Trades comic series was translated into vernacular languages and published regularly. Some of these comic strips were further developed into animated videos with voice overs. These videos were disseminated though digital modes on ET.com, Financial express, Business standard, Livemint, Hindu Business Line, Money Control, CNBCTV18.com and www.mcxindia.com, and TV channels such as ETNOW, TV18, CNBC Awaaz and Zee Business. The comic series was also displayed on digital screens at airports for higher visibility. Further, the comic series was extended to Radio and aired in 11 regional languages as short messages at 68 stations across India. In order to reach out to farmers on the benefits of hedging, an animated Agri movie was developed and broadcast on TV.

A new approach was adopted during the World Investor Week 2020, wherein, cricket themed advertisements were designed and published in various publications to impart investor awareness messages.

MCX IPF uses various social media channels like YouTube, Twitter, Facebook and LinkedIn for mass awareness and education.

TRAINING AND EDUCATION

Even during the time of the pandemic, the Company continued to spread among various stakeholders, knowledge about commodity derivatives, commodity trade, new products launched, and about using the derivatives exchange platform for price risk management and price discovery.

To achieve the said objectives, your Exchange during FY 2020-21:

i. Recorded 230 registrations for the MCX Certified Commodity Professionals (MCCP) examination;

ii. Conducted 5 customized MCCP training programmes over webinar;

iii. Held 144 programmes on the Bullion Index, Metal Index and the contracts launched on these indices during the year;

iv. Conducted over 77 Investor Protection Fund programmes across the country, of these over 39 programmes were for farmers and FPOs;

v. Conducted 136 general awareness programmes on commodity derivatives including on options and Options in Goods;

vi. Held 6 faculty development programmes for colleges and educational institutions;

vii. Conducted 2 capacity building programmes.

Your Company aims to increase the number of training sessions in the coming year for new participants such as corporates, banking and mutual fund segments.

The training material for the MCCP certification programme was updated. All MCCP training and tests are now based on the new training material and the related question bank is now aligned to the same. The testing process has also undergone a change due to the pandemic as all MCCP tests are now AI- proctored. This enables candidates to abide by social distancing guidelines, take tests from their office or homes, without the need to travel to test centers, as was the norm earlier. This change was necessitated due to a significant reduction in the MCCP registrations and tests taken. SEBI notification dated November 21, 2019, which has made the NISM derivatives paper no. 16 mandatory for members of the exchange, contributed to the reduction in numbers.

WAREHOUSING

Consequent to the transfer of clearing and settlement division of the Exchange to Multi Commodity Exchange Clearing Corporation Ltd. (MCXCCL) w.e.f. September 01, 2018, physical deliveries of the commodities traded on the Exchange platform are effected through MCXCCL. Necessary warehousing arrangements with Warehouse Service Providers (WSP)/ Vault Service Providers (VSP) have been made by MCXCCL to cater to the storage requirements of various members of the Exchange and their respective constituents/ depositors, who are willing to store goods and give delivery on the Exchange platform. MCXCCL also undertakes accreditation of the warehouses/vaults, to ensure safe storage and preservation of quality of goods deposited by various business participants for delivery on the Company's platform.

MCXCCL has a wide network of warehouses for delivery of commodities traded on the Company's platform. This provides confidence to members to trade on the Company's platform. As of March 31,2021, MCXCCL has entered into agreements with eight WSPs for facilitating physical deliveries in Agricultural Commodities and Base Metals. As at March 31,2021, MCXCCL has accredited 49 warehouses of these eight WSPs, of which 42 warehouses are registered with the Warehousing Development & Regulatory Authority (WDRA). The remaining 7 warehouses for metals do not fall under the jurisdiction of WDRA.

Further, MCXCCL entered into agreements with three VSPs for facilitating physical deliveries in Bullion. There are 24 accredited vaults of these agencies located at Ahmedabad, Delhi, Mumbai, Bengaluru, Chennai, Cochin, Hyderabad, Jaipur, Rajkot, Agra, Salem and Kolkata.

SUBSIDIARY

Multi Commodity Exchange Clearing Corporation Limited (MCXCCL)

MCXCCL, a wholly-owned subsidiary of your Company, was set up as a separate clearing house for providing Clearing and Settlement services to the Company. MCXCCL collects margin from the members, effects pay-in and pay-out and oversees delivery and settlement process. SEBI has granted renewal of recognition to MCXCCL for a period of three years commencing from July 31, 2019 and ending on July 31, 2022, subject to complying with all Rules, Regulations, Guidelines, and other instructions as may be issued by SEBI from time to time.

Risk management being an important function for a clearing corporation, MCXCCL has a well-defined Risk Management Framework in place. This works at various levels across the enterprise to form a strategic defense cover for the company. MCXCCL has constituted a Risk Management Committee, which periodically monitors and reviews risk management framework and the implementation of SEBI norms on risk management.

MCXCCL is recognized by European Securities & Markets Authority (ESMA) as 'third country' Central Counter Party (CCP) under European Market Infrastructure regulation, so that European participants can now apply lower risk weight age towards their exposures to MCXCCL. As commodity markets expand their outreach to the Eligible Foreign Entities (EFEs) interested in hedging their commodity exposures in Indian commodity markets, this will make hedging by European entities cost efficient.

MCXCCL is recognized as a Qualifying Central Counter party (QCCP) by SEBI. This enables the participants to apply lower risk weigh tage towards their exposures to MCXCCL as per Basel II capital adequacy framework. This is apart from membership of CCP12, the renowned global association of Central Counter parties and membership of Asia-Pacific Central Securities Depository Group (ACG).

During the year under review, there was no change in Authorized, Issued and Paid up Share Capital of MCXCCL. As on March 31,2021, Authorized Share Capital of MCXCCL stood at ' 30,000 lakh and issued and paid-up share capital of MCXCCL stood at ' 23,999 lakh. The net worth of MCXCCL as at March 31,2021 stood at ' 34,926.32 lakh.

Further, the Company has authorized MCXCCL to act as a Collecting Agent in terms of Rule 2(c) of Indian Stamp (Collection of Stamp Duty through Stock Exchanges, Clearing Corporations and Depositories) Rules, 2019 to collect the stamp duty under the said Rules. The Rules came into force with effect from July 01,2020. Accordingly, collection of stamp duty started from the said date.

Core Settlement Guarantee Fund (Core SGF)

SEBI vide circular no. SEBI/HO/CDMRD/DRMP/CIR/2018/111 dated July 11, 2018, issued norms related to computation of SGF requirement and standardized stress testing for credit risk in commodity derivatives. The total Core SGF as on March 31,2021 stood at ' 469 crore, of which ' 99 crore has been contributed by the Company, ' 283 crore has been contributed by MCXCCL and ' 87 crore has accrued from Penalties and Interest.

SME Exchange of India Limited (SME)

SME, a subsidiary of your Company was set up to provide a platform for transacting, clearing and settlement of trades in small and medium enterprises segment. The company had been under the process of members' voluntary winding up and the requisite formalities for the same had been completed. The Official Liquidator had issued the final report vide letter dated March 05, 2019. This was filed before Hon'ble High Court, Bombay, in respect of voluntary liquidation of SME. The Hon'ble High Court, Bombay has passed order dated August 30, 2019 granting the prayer for treating SME as dissolved. The requisite e-form(s) have been filed in this regard.

ASSOCIATE

Your Company entered into an agreement with Central Depository Services Limited (CDSL) and CDSL Commodity Repository Ltd. (CCRL) effective May 18, 2018, for setting up and operationalization of a new repository under the Warehousing (Development and Regulation) Act, 2007. Pursuant to Section 2(6) of the Companies Act, 2013, CCRL became an associate company of MCX w.e.f. June 04, 2018, consequent to investment of ' 1200 lakh comprising of 12,000,000 equity shares of ' 10 each, equivalent to 24% stake in CCRL.

During the year under review, there were no companies which have become or have ceased to be the joint venture of your Company.

Further, the Managing Director & CEO of your Company does not receive any remuneration or commission from its subsidiary. A report on the performance and financial position/salient features of the subsidiary and associate company as per the Companies Act, 2013 is provided as Annexure I.

In accordance with Section 136(1) of the Companies Act, 2013, the financial statements including consolidated financial statements and all other documents required to be attached thereto and audited annual accounts of MCXCCL, the subsidiary company, are available on our website at the weblink https://www.mcxindia.com/investor-relations.

CONSOLIDATED FINANCIAL STATEMENT

Your Company has, in accordance with Section 129(3) of the Companies Act, 2013, prepared the annual consolidated financial statements, consolidating its financials with its wholly owned subsidiary company, MCXCCL and the associate company, CCRL. The annual audited consolidated financial statements have been prepared in accordance with the requirements of Ind AS prescribed under Section 133 of the Companies Act, 2013 read with relevant rules issued there under, as applicable, and other accounting principles generally accepted in India and forms part of this Annual Report.

MANAGEMENT DISCUSSION AND ANALYSIS STATEMENT

Management Discussion and Analysis Statement, as stipulated under the SEBI Listing Regulations, 2015, forms a part of this Annual Report.

COMMITMENT TO QUALITY

Your Company continues its journey of delivering value to all its stakeholders through investments in quality programs. Your Company has been enabling excellence in product and service delivery through compliance of robust processes, quality management system, customer centricity and risk mitigation. Your Company has adopted several external benchmarks and certifications to validate the processes and controls implemented across the Exchange.

Your Company resolves to maintain its preeminent position in the Commodity space, hence is proactively investing towards building robust and scalable platform like Commodity Derivatives Platform to support its future business growth and regulatory compliance.

Despite the Financial Year 2020-21 being full of unprecedented challenges, your Company was successful in upholding its commitment towards compliance with and adherence to international best practices as laid out in ISO standards such as ISO 27001:2013 (Information Security Management System), ISO 22301:2019 (Business Continuity Management Systems) & ISO 9001:2015 (Quality Management Systems). Your Company successfully re-certified on all aforementioned standards.

As a part of its commitment to our subscribers, trading members, and the partner ecosystem, your Company also undertook proactive audits to strengthen its core processes, cyber security posture and adherence to regulator guidelines, as they came into effect. Your Company is happy to report that despite issues posed by the pandemic, the organisation has successfully evolved to adapt to the new-normal, and that all security incidents were contained to have a zero effect on the trading platform, or any adverse effect to our subscribers and trading partners.

It is the constant endeavour of your Company to hire and retain the top talent. As a part of the strategic organisational restructuring, the Company has invested in senior leadership resources and also strengthened the middle management layer.

RESEARCH AND DEVELOPMENT

Your Company undertakes research activities for developing new products, considering the evolving market needs, policy and regulatory landscape and global best practices. Based on such research and market requirements, the Exchange launched Rubber futures, apart from futures contracts in MCX iCOMDEX Bullion Index and Base Meal Index during the year 2020-21. The MCX iCOMDEX Indices are constituted of commodity futures contracts traded on MCX and conform to both the SEBI prescribed guidelines, as well as, the financial benchmarks set by the International Organization of Securities Commissions (IOSCO) in construction, administration and governance.

Your Company undertook a number of research studies during 2020-21. A study titled 'Study on Comparative Assessment of the Commodity Markets of China and India' was carried out by a team from IIM Ahmedabad to study the special characteristics of the commodity derivatives market in China. The study found some unique features in the regulatory framework and market development initiatives by the commodity exchanges in China, which contribute to their success. Your Company also undertook two survey-based research studies on futures trading in two commodities - Mentha Oil and Cardamom. The main findings of the studies and recommendations of the researchers for development of these two contracts were forwarded to SEBI for further action.

Following SEBI guidelines and instructions on use of interest income from the Exchange's Investor Protection Fund (IPF) for research, your Company undertook four research studies, in partnership with academic institutions, on various themes connected to commodity derivatives market. These were 'How futures market in India has improved efficiency of physical commodity markets' undertaken by IIT Kharagpur, 'Why commodities should be included in an investment portfolio RS. An analytical study' undertaken by IIM Kozhikode, 'Overcoming issues of quality standardization in agricultural commodities to facilitate participation in derivatives' undertaken by IIM Bangalore and 'Developing Domestic Price Benchmarks and Lessons from Global Markets - Case of Base Metals' undertaken by IIM Ahmedabad. The findings of the studies have been widely disseminated for creating awareness about commodity derivatives market among the people. They are also available on the website of the company at www.mcxindia.com.

During the year 2020-21, your Company also engaged with a number of educational institutions and participated in research conferences conducted by institutions such as IIM Ahmedabad, The National Institute of Securities Management (NISM), etc. To spread awareness and promote research in commodity markets and its ecosystem, the 'Commodity Insights Yearbook 2020' was published during the year. NISM an institution established by SEBI, was the partner organization in publication of the Yearbook. The publication was released by Mr. G. Mahalingam, Whole Time Member, SEBI, at a 'Ring the Bell' ceremony during World Investor Week 2020. The Commodity Insights Yearbook, an annual publication, aims at dissemination of comprehensive knowledge on the commodity market ecosystem, for the benefit of all stakeholders including market participants, financial institutions, policymakers, practitioners, analysts, producers, traders, consumers, industry observers, academicians, etc. The 2020 edition of the Yearbook focussed on the Precious Metals segment. Like in earlier years, the Yearbook, together with relevant data in user-friendly spreadsheets, has been made available for free download on the Exchange's website to ensure maximum dissemination.

ENVIRONMENTAL RESPONSIBILITY

Given the nature of its operations, your Company has a very low impact on the environment. Notwithstanding, your Company is committed to minimizing its environmental impacts through efficient use of natural resources, including electricity, which is the key touch point of the Exchange's technology driven business. Your Company is governed by an effective Environmental Policy. Your Company believes that in order to meet the objectives of its Environmental Policy, employee commitment is imperative. Your Company constantly endeavors to create awareness amongst employees and encourages them to adopt conservation practices on an ongoing basis. Your Company successfully completed ISO 14001:2015 surveillance audit without any observation, and continues to monitor its Environment Management Plan, developed on the basis of the Environment Review conducted annually, to assess the impact of the Company's activities. Your Company has also developed an E-Waste Policy for the safe disposal of e-waste from its premises and has tie-ups with authorized e-waste recyclers to dispose the e-waste in an eco-friendly manner. Further, the e-waste disposal is minimized by adopting best practices in maintenance and re-use of resources. Other initiatives implemented by your Company to save the environment are smoke emission test, noise pollution test, water test, cold fogging and password enabled printer to minimize wastage of paper.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Embedded in the vision and mission of your Company, CSR has always been considered as an opportunity to serve the nation and to bring a perceptible change in the lives of the people. Focused on the community priorities, your Company regularly aligns its strategy, by constantly expanding its CSR outreach, for the inclusive growth and development of the society.

The CSR allocation for FY 2020-21 was ' 288 lakh. Further, in accordance with recent amendments to the CSR Rules, the Company brought forward CSR un-spent amount of earlier years aggregating to ' 269 lakh.

The Company has made specific allocations towards supply of medical equipment to public hospitals in order to supplement the efforts of public hospitals to provide treatment to COVID-19 patients. In the year under review, other interventions included supporting rural development through Integrated Watershed Management Scheme, empowering women and differently abled, enhancing education to visually challenged, encouraging higher education and pursuing nursing courses for economically weaker girl students, etc.

The interventions during the year epitomize the conviction of your Company to serve and empower the needy communities and to contribute towards the development of the nation. Going forward, your Company aims to further strengthen its initiatives and continue to serve the society at large.

The brief of the CSR activities undertaken during the year have been provided in the Annual Report on CSR activities forming part of this Report as Annexure II.

The CSR Policy formulated in accordance with the Companies Act, 2013 (as amended from time to time), guides the Company's CSR approach to sub serve the well-being of the society at large. The CSR Policy and initiatives adopted by the Company on CSR are available at the web link https://www.mcxindia.com/about-us/csr.

BUSINESS RESPONSIBILITY REPORT

Pursuant to Regulation 34 of the SEBI Listing Regulations, 2015, the Annual Report of top 1000 listed entities based on market capitalization, shall include a Business Responsibility Report (BRR) describing the initiatives taken by Company from an environmental, social and governance perspective. In compliance with the same, BRR forms part of this Annual Report.

ETHICS AND GOVERNANCE POLICIES

Your Company adheres to high ethical standards to ensure integrity, transparency, independence and accountability in dealing with all stakeholders. Accordingly, your Company has adopted various codes and policies to carry out the duties in an ethical manner. Some of these codes / policies framed and implemented by your Company are the Code of Conduct and Code of Ethics, Code of Conduct for Prevention of Insider Trading, Code of Practices and Procedures for Fair Disclosures of Unpublished Price Sensitive Information, Whistle Blower Policy /Vigil Mechanism, Policy on Related Party Transactions, Policy for determining Material Subsidiaries, Corporate Social Responsibility Policy, Risk Management Policy, Nomination and Remuneration Policy, Policy for Appointment of Independent External Persons on Committees of the Board, Board Diversity Policy, etc.

ANNUAL RETURN

Pursuant to Section 92(3) of the Companies Act, 2013, the Annual Return for FY 2020-21 is available at the web link https:// www.mcxindia.com/investor-relations.

MEETINGS OF THE BOARD

Eleven meetings of the Board of Directors were held during FY 2020-21. For further details, please refer to the report on Corporate Governance forming part of this Annual Report.

WHISTLE BLOWER POLICY / VIGIL MECHANISM

Your Company believes in the conduct of the affairs of its constituents in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behaviour. Pursuant to Section 177(9) of the Companies Act, 2013 read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 and Regulation 22 of the SEBI Listing Regulations, 2015, the Board of Directors have implemented a vigil mechanism through the adoption of a Whistle Blower Policy which has been amended from time to time. For further details, please refer to the report on Corporate Governance forming part of this Annual Report.

CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES

Your Company has formulated a policy on materiality of related party transactions and dealing with related party transactions as amended from time to time. The latest Policy is uploaded on the website of your Company and may be accessed at the weblink: https://www.mcxindia.com/docs/default-source/investor-relations/corporate-governance/policy- on-related-party-transactions may2020.pdfRS.sfvrsn=a9f191902.

All related party transactions entered into by your Company during the period under review were in the ordinary course of business and at arm's length pricing basis. Also, prior omnibus approval was obtained for related party transactions which were of repetitive nature and entered in the ordinary course of business and are at arm's length. All the related party transactions entered into by your Company during the year under review, were placed before and approved by the Audit Committee and/or by the Board, as applicable, in accordance with the provisions of the Companies Act, 2013, SEBI Listing Regulations, 2015 and other applicable guidelines/directions from the Regulator, if any. Further, transactions entered into between a holding company and its wholly owned subsidiary whose accounts are consolidated with such holding company are exempted from the provisions related to omnibus approval, under the applicable provisions of the Companies Act, 2013 and the SEBI Listing Regulations, 2015. However, the Company, as a good corporate governance practice, does seek omnibus approval for transactions to be entered into with MCXCCL, wholly owned subsidiary of the Company.

Pursuant to Section 134(3)(h) read with Rule 8(2) of the Companies (Accounts) Rules, 2014, the particulars of material contracts or arrangements with related parties referred to in Section 188 (1) of the Companies Act, 2013, in Form AOC-2, is appended as Annexure III to this Report.

All Related Party Transactions as required under Ind AS 24 - Related Party Disclosures, are reported in Note 38 of Notes to Accounts of the standalone and consolidated financial statements of your Company.

DIRECTORS

Your Company, being a recognized stock exchange and regulated by SEBI, is required to, inter alia, comply with the provisions relating to constitution of the Company's Board of Directors as specified in the Companies Act, 2013, the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 (SECC Regulations, 2018) and the SEBI Listing Regulations, 2015.

Your Company has a well-diversified Board comprising of Directors coming from various walks of life and having broad range of experience, in the areas of management, technology, governance, leadership, finance and legal. A multi-faceted talent-pool enables leveraging differences in thought, perspective, knowledge, skill, regional and industry experiences, to ensure effective corporate governance and sustained commercial success of the Company.

As on March 31, 2021, the Board comprised of 10 (ten) Directors, of which 6 (six) were Public Interest Directors (PID), 3 (three) were Shareholder Directors and 1 (one) Managing Director. Your Company had 2 (two) women independent Directors on the Board, in compliance with the SEBI Listing Regulations, 2015.

A "Public Interest Director" under the SECC Regulations, 2018, means an independent director representing the interests of investors in securities market and who is not having any association, directly or indirectly, which in the opinion of the Board, is in conflict with his role, and accordingly such directors are considered as Independent Directors for adhering compliance with the provisions of the SEBI Listing Regulations, 2015 and the Companies Act, 2013.

As mandated, all the Public Interest Directors of your Company have been duly registered with the databank for Independent Directors maintained by the Indian Institute of Corporate Affairs.

Your Company has received confirmations from all the Public Interest Directors to the effect that each of them meets the criteria of independence, as prescribed under Regulation (16)(1)(b) of the SEBI Listing Regulations, 2015 and Section 149(6) of the Companies Act, 2013. There has been no change in the circumstances affecting their status as independent directors of the Company. The nomination/ appointment of Independent Directors/ Public Interest Directors on the Board of your Company is in accordance with the eligibility conditions prescribed by SEBI and is made with the approval of SEBI.

Further, all the Directors have confirmed that they are 'Fit and Proper,' in terms of the SECC Regulations, 2018. Your Company has also obtained affirmation of adherence to Schedule IV of the Companies Act, 2013 and the Code of Conduct of your Company in accordance with the SEBI Listing Regulations, 2015 from all the Directors, as applicable.

In view of the expiry of tenure of Mr. Shankar Aggarwal (DIN: 02116442) as a PID on the Board of your Company on September 30, 2020, the Board, in compliance with the provisions relating to appointment and performance review of a PID prescribed under the SECC Regulations, 2018 and SEBI circular no. SEBI/HO/MRD/DOP2DSA2/CIR/P/2019/26 dated February 5, 2019, recommended to SEBI, the extension of tenure of Mr. Shankar Aggarwal as a PID on the Board, by another term of three years. SEBI vide letter dated June 24, 2020, approved the re-appointment of Mr. Shankar Aggarwal as a PID on the Board of your Company. The Board is of the opinion that Mr. Shankar Aggarwal possesses the requisite qualification, experience, expertise and holds high standards of integrity.

Details relating to performance evaluation is covered in the section relating to 'Performance Evaluation of the Board' Ms. Madhu Vadera Jayakumar (DIN: 00016921), Shareholder Director, was liable to retire by rotation at the 18th Annual General Meeting (AGM) of the Company held on August 31,2020 and being eligible, offered herself for re-appointment. The resolution of her re-appointment was passed by requisite majority. However, Ms. Madhu Vadera Jayakumar tendered her resignation as a Shareholder Director from the Board of your Company, w.e.f. October 14, 2020, due to personal reasons. Mr. Amit Goela (DIN: 01754804), Shareholder Director, who was also liable to retire by rotation at the 18th AGM of the Company, was re-appointed with the approval of the shareholders and SEBI w.e.f. August 31,2020.

Ms. Padma Raghunathan (DIN: 07248423), Shareholder Director, tendered her resignation from the Board of your Company, w.e.f. close of business hours on March 30, 2021, due to her super annuation from the services of NABARD.

In accordance with the provisions of the Companies Act, 2013, Mr. Hemang Raja (DIN: 00040769), Shareholder Director, who has been longest in office since his appointment, is liable to retire by rotation at the ensuing AGM and being eligible, is seeking re-appointment. The Board recommends his re-appointment.

KEY MANAGERIAL PERSONNEL (KMP)

The following employees became KMPs under the SECC Regulations, 2018 during FY 2020-21:

Sr. No. Name Effective Date
1 Mr. Manav Jain, Chief Technology Officer September 01,2020
2 Ms. Ruchi Shukla, Head - Energy October 24, 2020
3 Mr. Puneet Shadija, Vice President - Technology February 08, 2021
4 Mr. Pradip Dey, Vice President - Technology February 10, 2021
5 Mr. Sambit Patnaik, Vice President - Business Development March 01,2021
6 Mr. Dhananjay Rokde, Vice President - Technology (CISO) March 18, 2021

Further, the following employees ceased to be KMPs under the SECC Regulations, 2018 during FY 2020-21:

Sr. No. Name Last working day
1 Mr. Sunil Kurup, Vice President - Technology October 13, 2020
2 Dr. Pareshnath Paul, Chief Information Officer March 31,2021
3 Mr. Arvind Sharma, Vice President - Business Development# March 31,2021

#on attaining super annuation

PERFORMANCE EVALUATION OF THE BOARD

Your Company has formulated a Policy for Performance Evaluation/Review in accordance with the provisions of the Companies Act, 2013, SEBI Listing Regulations, 2015, SECC Regulations 2018, SEBI Circular dated January 05, 2017 providing guidance to listed entities about various aspects involved in the Board Evaluation process ("SEBI Guidance Note") and SEBI circular dated February 05, 2019 on performance review of Public Interest Directors.

The Policy has been framed with an objective to ensure that, individual directors of the Company and the Board as a whole, work efficiently and effectively, for the benefit of the Company and its stakeholders.

Your Company has implemented a system of evaluating performance of the Board of Directors and of Committees, and of individual Directors, through peer evaluation, excluding the Director being evaluated, on the basis of a structured questionnaire which comprises evaluation criteria as listed hereunder.

The criteria for performance evaluation, inter-alia, includes the following:

i. Internal Evaluation of Individual Director's Performance

An individual Director's performance is evaluated based on his/ her level of participation and contribution to the performance of Board/ Committee(s) meetings, qualification & experience, knowledge and competency, fulfillment and ability to function as a team, initiatives taken, adherence to the rules/regulations, having independent views and judgement, providing guidance to senior management and Board members, etc.

ii. External Evaluation of Individual Director's Performance

Pursuant to SECC Regulations, 2018 read with SEBI circular dated February 05, 2019, the tenure of PIDs may be extended by another 3 years, subject to performance evaluation, internal and external, both carrying equal weightage. Such PIDs shall be subject to:

a. Internal evaluation by all the governing board members, based on the criteria for the performance review of individual director; and

b. External evaluation by a management or a human resources consulting firm based on their pre-determined criteria.

iii. Evaluation of the Board as a Whole

Providing entrepreneurial leadership to the Company, having clear understanding of the Company's core business and strategic direction, maintaining contact with management and external stakeholders, ensuring integrity of financial controls and systems of risk management, making high quality decisions, monitoring performance of management, maintaining high standards of integrity and probity, encouraging transparency, etc.

iv. Chairman's Performance Evaluation

Providing effective leadership, setting effective strategic agenda of the Board, encouraging active engagement by the Board members, providing guidance and motivation to MD & CEO, impartiality in conducting discussions, establishing effective communication with all stakeholders, etc.

v. Performance Evaluation of Board Committees

Sufficiency in the scope for addressing the objectives, effectiveness in performing the key responsibilities, adequacy in composition and frequency of meetings, quality of relationship of the Committee with the Board and the management, clarity of agenda discussed, discussion on critical issues, clarity of role and responsibilities, etc.

AUDIT COMMITTEE

A detailed note on the composition, terms of reference etc of Audit Committee is covered under the Corporate Governance Report. During the year under review, all the recommendations made by the Audit Committee were accepted by the Board, except the following:

The Audit Committee at its meeting held on May 30, 2020, while considering amendments to the Dividend Distribution Policy of the Company, recommended to the Board a revision in the dividend pay-out ratio to 30%-75% (earlier 30%-50%). The Board at its meeting held on the same day, agreed not to have a floor of 30% for the pay-out ratio and decided to fix the upper limit of dividend pay-out at 75%.

STATUTORY AUDITORS AND THEIR REPORT

M/s Shah Gupta & Co., Chartered Accountants (Firm Registration No. 109574W) were appointed as Statutory Auditors of the Company under casual vacancy for FY 2014-15. Subsequently, they were appointed as Statutory Auditors by the shareholders, at their 13th Annual General Meeting (AGM) held on September 29, 2015 for a period of five years, subject to ratification by the shareholders at every AGM. Thereafter, in terms of the amendment in the provisions of the Companies Act, 2013, the shareholders at the 16th AGM of the Company held on August 31,2018 approved that the said appointment would not be subject to ratification at every subsequent AGM.

The shareholders, at their 18th Annual General Meeting (AGM) held on August 31,2020 have appointed M/s Shah Gupta & Co., Chartered Accountants (Firm Registration No. 109574W) for another term of 5 (five) consecutive years to hold office from the conclusion of the 18th Annual General Meeting until the conclusion of the 23rd Annual General Meeting of the Company, at a remuneration of ' 15 lakh (Rupees Fifteen lakh) for the financial year 2020-21, plus reimbursement of out-of- pocket expenses and applicable taxes, with an escalation of upto 10% once in two years and change in the engagement partner.

The Report given by the Auditor on financial statements of the Company forms part of the Annual Report. There is no qualification, reservation or adverse remark made by the Auditor in their report.

SECRETARIAL AUDITORS AND THEIR REPORT

M/s Naithani & Associates, Practicing Company Secretaries, were appointed as the Secretarial Auditors by the Board to conduct the secretarial audit of the Company for the financial year 2020-21. Further, M/s Rathi & Associates, Practicing Company Secretaries, were appointed as the Secretarial Auditors by the Board of MCXCCL to conduct their secretarial audit for the financial year 2020-21.

In accordance with Section 204(1) of the Companies Act, 2013 and Regulation 24A of SEBI Listing Regulations, the Secretarial Audit Reports of the Company and MCXCCL for the financial year ended March 31,2021 are annexed as Annexure IV to this Report.

The Secretarial Audit Reports do not contain any qualification, reservation or adverse remark.

INTERNAL CONTROLS AND THEIR ADEQUACY

Your Company has maintained adequate internal financial controls over financial reporting, which are constantly assessed and strengthened with new/revised standard operating procedures. The Board has adopted policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the Company's policies, safeguarding of its assets, prevention and detection of fraud, error reporting mechanisms, accuracy and completeness of the accounting records and timely preparation of reliable financial disclosures.

The Company's internal control system is commensurate with its size, scale and complexities of its operations. The Audit Committee of the Board actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen the same. The Audit Committee of the Board and Statutory Auditors are periodically apprised of the internal audit findings and corrective actions taken. Audit plays a key role in providing assurance to the Board of Directors on the effectiveness of internal controls and the veracity of the financial statements. Such internal financial controls over financial reporting were operating effectively as of March 31,2021.

DETAILS IN RESPECT OF FRAUDS REPORTED BY AUDITORS UNDER SUB SECTION (12) OF SECTION 143 OTHER THAN THOSE WHICH ARE REPORTABLE TO THE CENTRAL GOVERNMENT

No fraud has been reported by the Auditors to the Audit Committee or the Board.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE

No significant and material orders were passed, during the year under review, by the regulators or courts or tribunals impacting the going concern status and Company's operations in future.

LEGAL UPDATE

 

Crude Oil Matters: On account of multiple writs filed against Exchange before various High Courts of India, the Exchange filed a Transfer petition before the Hon'ble Supreme Court, inter-alia among other grounds that none of the Courts have territorial jurisdiction over the matter and therefore all the writs ought to be transferred to Mumbai. SEBI also had filed a separate Transfer Petition before the Supreme Court seeking transfer of the Writ Petitions. None of the Hon'ble Courts have granted any interim relief.

Pursuant to petition of SEBI, the Hon'ble Supreme Court vide its order dated July 24, 2020 stayed the proceedings of all the Writ Petitions filed before various High Courts till the final disposal of the matter and tagged the petition of SEBI with the Company's petition. Post the said order, two more Transfer Petitions were filed before Hon'ble Supreme Court. All the aforesaid matters shall be listed in due course for hearing and disposal.

PESB Vs MCX (Singapore International Arbitration Centre):

On January 15 2021, PESB filed Notice of Arbitration before Singapore International Arbitration Centre (SIAC) for a claim of Singapore Dollar (SGD) 4.5 - 5 million on a rough and preliminary basis. On January 29 2021, the Company filed its Response and Counter Claim whereby the Company claimed an amount of approximate SGD 32,82,874.

Thereafter, the Parties have initiated discussion for amicable settlement on mutual terms and accordingly have regularly informed SIAC to pause arbitration proceedings. The matter is now kept on hold by SIAC.

Compounding of offences:

During FY 2014-15, your Company had filed 9 applications seeking compounding of offences of earlier years, under Section 621A of the Companies Act, 1956, against the Show Cause Notices received from the Registrar of Companies, Mumbai. Compounding had been effected in respect of 8 applications and the Company had paid the fees imposed by the Compounding Authority relating thereto aggregating to ' 7,43,000/-. The Company had also received the copy of the Orders passed by the relevant authority in respect of the 8 compounding applications. As on March 31,2021, one compounding application is pending for hearing with the Regional Director, Western Region Mumbai.

HUMAN RESOURCE DEVELOPMENT

Human Resource (HR) is a strategic business partner and plays a pivotal role in developing company's strategy by enhancing employees perception throughout the workforce and providing a well - rounded experience for the employee. As on March 31.2021, the Exchange had 343 employees.

In order to assess employee's potential to manage next level responsibilities and setting the right work culture across the organization, HR completed Assessment Centre in the organization through a third party agency for all employees at Assistant Vice President and above level.

Keeping in mind the health of the employees, your Company has taken a special COVID-19 policy for all employees in case they are hospitalised or home quarantined.

During COVID times HR organised employee engagement activities known as Fun Fridays for all employees to participate. This helped in improving connect between the employees.

Exchange has also rewarded employee's children for their exceptional efforts in passing 10th and 12th standard examination with flying colors.

DISCLOSURES PERTAINING TO THE SEXUAL HARASSMENT OF WOMEN AT THE WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

Your Company continues to have in place an Anti-Sexual Harassment Policy and is complied with the provisions relating to the constitution of Internal Complaints Committee under " The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013".

No complaint was received during the FY 2020-21 in relation thereto.

EMPLOYEE STOCK OPTION SCHEME

The stock options granted to the employees of the Company, operate under the "Employee Stock Option Scheme 2008 (ESOP 2008)" of the Company, formulated in accordance with the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999, which was approved by the shareholders at the Extraordinary General Meeting held on February 27, 2008. MCX ESOP Trust constituted by the Company is responsible for administration and implementation of the scheme under the directions of the Nomination and Remuneration Committee of the Board of Directors of the Company. The said Scheme is being implemented in compliance with the provisions of the SEBI (Share Based Employee Benefits) Regulations, 2014 [SBEB Regulations] and there has been no change in the Scheme during the year ended March 31.2021.

There were no grants pending for vesting as at March 31,2021. No new grants were made during FY 2020-21

The relevant disclosures required under the SEBI Regulations for the year ended March 31,2021 are available on the website of the Company at https://www.mcxindia.com/investor-relations/corporate-governance.

PARTICULARS OF REMUNERATION

Your Company has adopted a well-defined Nomination & Remuneration Policy for Directors, Key Managerial Personnel and other employees formulated in terms of the provisions of SECC Regulations, 2018, Companies Act, 2013 and SEBI Listing Regulations, 2015. The said Policy forms part of this Report as Annexure V, and is also available under the weblink https:// www.mcxindia.com/docs/default-source/investor-relations/corporate-governance/remuneration-policy march2019. pdfRS.sfvrsn=ebedd890 2

The ratio of the remuneration of each Director and KMP to the median employee's remuneration and other details in accordance with Section 197 (12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and Regulation 27(6) of the SECC Regulations, 2018, forms part of this Report as Annexure VI.

Further, in accordance with Section 197 (12) of the Companies Act, 2013 read with Rule 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, and Regulation 27(5) of SECC Regulations, 2018, a statement containing particulars of employees as stipulated therein also forms part of this Report as Annexure VII.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS/OUTGO

The disclosures to be made under Section 134 (3) (m) of the Companies Act, 2013 read with Rule 8 (3) of the Companies (Accounts) Rules, 2014, are explained as under:

A) CONSERVATION OF ENERGY

Your Company's operations are not energy intensive. However, it undertook various measures to reduce energy consumption by using energy-efficient computer systems and equipment. As an ongoing process, your Company evaluates new technologies and techniques to make its infrastructure more energy efficient.

i. Steps taken or impact on Conservation of Energy:

Your Company has in-row cooling system for servers in the Data Center. This cools only the equipment and not the external environment, thereby, ensuring that no energy is wasted in running compressors excessively, to maintain the desired temperature levels of external environment. Additionally, your company has VRV air- conditioning system for the entire building, which works on invertor compressor, resulting in energy saving. Your Company has UV resistant film on facade glass windows to reduce the heat entering the building. This reduces the air-conditioning load. The glass windows also reduces the electricity consumption due to lesser requirement of lighting during the day.

Your Company has installed Motion/Occupancy Sensors in low footfall area for controlling lights and reduce energy consumption.

Your Company maintains adequate capacitor bank for non-linear electrical loads like air-conditioning plant, pumps and motors, thereby reducing the drawing of extra energy and improving the power factor. The Company uses low energy consuming electrical equipment with modern efficient devices such as LED lights, IP based cameras etc. Also, energy audit, heat load calculations and power factor corrections are carried out at regular intervals.

ii. Steps taken by your Company for utilizing alternate sources of energy:

No alternate source of energy is utilized by your Company.

iii. Capital investment on energy conservation equipment:

No capital investment on energy conservation equipment/s during the year under review.

B) TECHNOLOGY ABSORPTION

 

(i) The efforts made towards technology absorption:

Cloud Initiative - laaS & DaaS

This year, your Company undertook the first step to avail public cloud services i.e. Infrastructure as services (IaaS) requirement for testing & development environments provisioning and Desktop as services (DaaS) for development to leverage its benefits without initial huge capital expenditure and be able to scale up/down based on demand of required infrastructure. By availing the aforementioned public cloud services, your Company have been able to save on efforts, time and capital involved in provisioning the required infrastructure for testing and development environments.

Cyber Security framework

Special emphasis was laid by your Company on continuous improvement in its cyber security framework and information security management systems. There is a continuous process and highest priority was given by the senior management to all matters of cyber security and risk management. It is the constant endeavour of your Company to comply with the expectations of the Regulator and guidelines laid down by the national agencies tasked with information security and cyber defence of critical infrastructure. There is a dedicated Security Operations Centre (SOC) staffed with industry experts who are armed with the latest threat intelligence to protect our critical infrastructure. The SOC provides 24x7x365 vigilance against cyber threats, proactive response against incidents, and provides vital inputs on improvement of your company's security architecture and design.

Your Company is not just committed to protection of assets by deploying security measures for Work from Home (WFH), but have implemented a long-term strategy to deal with the challenges of teleworking. As the Company is undertaking its first steps towards a cloud implementation, all required measures and counter measures are being undertaken to ensure that the new infrastructure is protected from inception, and adheres to the internal policies and regulatory guidelines that are published from time to time.

The Company has also been classified as a national CII (critical information infrastructure) custodian, vide notifications from the Ministry of Finance (MoF) & National Critical Information Infrastructure Protection Center (NCIIPC). Your Company has already taken measures to meet expectations of the agency, keeping in mind the additional due diligence and controls for safeguard of the CII.

Switchover/switchback between Primary & DR site on account of 'Nisarga'

Your Company ensured smooth running of Trading Operations from 3rd June 2020 till 12th June 2020 from Disaster Recovery Site, on account of the warning received by IMD on cyclonic storm 'Nisarga' in Mumbai. Your Company, in compliance with regulatory norms, conducted smooth successful two day unannounced live trading twice in FY 2020-21.

Upgradation of information technology systems

Your Company has allocated substantial resources towards upgrading information technology systems, with an over-arching goal of achieving higher capacity, lower latency, improving market efficiency and transparency, enhancing user access and providing flexibility for future business growth and market needs. Your Company had upgraded its system to support negative pricing, Options for Goods and iCOMDEX Bullion Index.

Enhancements in negative pricing includes support for negative bid and ask including "0" Zero functionality in MAT & TWS were provided to the Members. The Exchange also released revised version of MCX Application Programing Interface (API) for Fix and Non Fix API to accept negative price in the system for CTCL vendors and Members developing In-house application.

(ii) The benefits derived like product improvement, cost reduction and product development:

During FY 2020-21, your Company continued to invest in IT systems and using it as an enabler to provide a competitive advantage. Your Company's robust technology infrastructure continues to provide uninterrupted trading experience, reliability, credibility and mitigating risk of single point of failure.

Your Company has an in-house software development team, which undertook several initiatives in FY 2020-21 to enhance, develop and roll out various ancillary and peripheral systems as required by the organisation. In certain areas, the team has developed in-house solutions like Sentinal - Alert Management System, NMS - Notification Management System etc, to replace existing vendor applications, thereby removing vendor dependency and increasing flexibility to implement requirements as per business expectation and timelines. Other initiatives included, CTCL approval process automation, CTCL enablement/disablement facility as an enhancement to eUIMS portal and Hedge application for eligible foreign entities (EFEs). With a right mix of in-house and outsourced resources, your Company is adopting new technologies to deliver the growing business needs and ensuring quality services for the clients.

(iii) Details of imported technology (imported during the last three years reckoned from the beginning of the financial year):

Your Company has not directly imported any technology during the last three financial years.

(iv) Your Company has incurred ' 25 lakh on Research and Development during the year under review:

C) FOREIGN EXCHANGE EARNINGS / OUTGO DURING THE YEAR UNDER REVIEW

The details of foreign exchange earnings and outgo during the year under review forms part of the Significant Accounting Policies and Note no. 35 of Notes to Accounts of the standalone and consolidated financial statements.

CORPORATE GOVERNANCE

Your Company is committed to good corporate governance aligned with the best corporate practices. The report on Corporate Governance, as stipulated under Regulation 34(3) read with Schedule V of the SEBI Listing Regulations, 2015 and the certificate from a Practicing Company Secretary, regarding compliance of conditions of corporate governance, forms part of this Annual Report. The report on Corporate Governance also contains disclosures as required under the Companies Act, 2013.

The disclosure pertaining to resources committed towards strengthening regulatory functions and ensuring compliance with regulatory requirements, backed by an activity based accounting, in terms of Regulation 33 of the SECC Regulations, 2018, is as under.

The Company has dedicated resources to manage the regulatory functions given in the table below. There are 113 resources in these functions at various designations. Each of such department is headed by a senior official of the Company, reporting to the Chief Regulatory Officer, who in turns reports to MD & CEO. The total cost incurred by the Exchange towards these functions in FY 2020-21 was ' 1,365 lakh.

Department Count
Regulatory Compliance 5
Inspection & Audit 23
Membership 18
Investor Services Department 23
IPF 4
Legal Compliances 2
Surveillance & Investigation 20
Market Operations 18

UPDATES POST MARCH 31,2021:

Director/KMP updates:

i. On the expiry of tenure of Mr. Basant Seth (DIN: 02798529) as a PID on the Board, the Exchange had sent a panel of names as required under the SECC Regulations, 2018 and applicable SEBI circular. SEBI vide its letter dated April 08, 2021, approved the appointment of Mr. Chandra Shekhar Verma as a Public Interest Director on the board of the Company for a period of three years from the date of his joining in terms of Regulation 24(2) of SECC Regulations, 2018. Mr. Verma joined the Board of the Company on May 22, 2021.

ii. In view of the approaching expiry of tenure of Dr. Deepali Pant Joshi (DIN:07139051) as a PID on the Board, the Exchange had sent a panel of names as required under the SECC Regulations, 2018 and applicable SEBI circular. SEBI vide its letter dated June 29, 2021, approved the appointment of Mr. Harsh Kumar Bhanwala as a Public Interest Director on the board of the Company for a period of three years from the date of his joining in terms of Regulation 24(2) of SECC Regulations, 2018. His appointment would be effective August 08, 2021, or from the date of his joining the Board.

iii. Mr. Vaibhav Aggarwal and Mr. Vijay Patel have been appointed at Vice President level in the Technology Department w.e.f May 03, 2021 and May 06, 2021 respectively, and are KMPs under the SECC Regulations, 2018. Further, Mr. Dhananjay Rokde ceased to be the CISO of the Company w.e.f. July 02, 2021.

Regulatory updates:

April 2021

i. In view of the prevailing situation due to COVID-19 pandemic and representation received from the Association of National Exchanges Members of India (ANMI), Stock Exchanges and Depositories, SEBI has decided to extend the timelines for compliance with the regulatory requirements by the Trading members / Clearing Members / Depository Participants / KYC Registration Agencies till July 31,2021 and certain compliance requirements till June 30, 2021. June 2021

i. "Settlement of Running Account of Client's Funds lying with Trading Member (TM)" SEBI has decided the following: Trading members should settle the running account of client funds after considering the end of the day (EOD) obligation of funds as on the date of settlement across all the stock exchanges, at least once within a gap of 30 or 90 days between two settlements of running account as per the preference of the client.

TM will have to first adjust the value of securities accepted as collateral from the clients by way of margin pledge created in the depository system for the purpose of margin and value of commodities respectively and then they should adjust the client funds.

Client's running account shall be considered settled only by making actual payment into client's bank account and not by making any journal entries. Journal entries in client account shall be permitted only for levy / reversal of charges in client's account.

The clients having credit balance, who have not done any transaction in the 30 calendar days since the last transaction, the credit balance should be returned to the client by trading member within next three working days irrespective of the date when the running account was previously settled.

Retention of any amount towards operational difficulties in settling the accounts of regular trading clients (active clients) should be discontinued.

The Authorized person is not permitted to accept client's funds and securities.

July 2021

i. SEBI had issued Master circular compiling all the circulars issued by the department till April 30, 2021.

ii. SEBI had issued detailed guidelines on Standard Operating Procedure for handling of Technical glitches by Market Infrastructure Institutions (MIIs) and payment of "Financial Disincentives structure.

The said "Financial Disincentives", when triggered automatically under predefined conditions, shall be credited to the Investor Protection Fund / Core Settlement Guarantee Fund maintained by the MII.

iii. In order to bring in uniformity while giving effect to the contract modifications so that the desired impact and the modified contract represents a healthy replica of the physical market, SEBI has decided, in consultation with the Stock Exchanges, to reduce the number of days of advance intimation for all the three categories i.e. Category A, Category B and Category C, to 10 days.

Product updates:

i. The Exchange has aligned the delivery lot and trading lot of Mentha Oil contracts to 2 drums w.e.f. July 2021 expiry, from the earlier delivery and trading lot of 6 drums.

ii. The Exchange has launched Silver Mini options contracts with Silver Mini(5 Kilograms) Futures as underlying on July 19, 2021.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement of Section 134 of the Companies Act, 2013, your Directors confirm that:

a) in the preparation of the annual accounts for the year ended March 31,2021, the applicable accounting standards have been followed and there are no material departures from the same;

b) they have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31,2021 and of the profit of the Company for the year ended on that date;

c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) they have prepared the annual accounts on a 'going concern' basis;

e) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

ACKNOWLEDGMENTS

The Board of Directors wishes to place on record their sincere gratitude for the valuable guidance and continued support extended by the Securities and Exchange Board of India, Reserve Bank of India, Stock Exchanges, Ministry of Corporate Affairs, other government authorities, Banks and other stakeholders. The Directors would also like to take this opportunity to express their appreciation for the dedicated efforts of the employees of the Company.