Hold Multi Commodity Exchange of India Ltd For Target Rs.1,746 - ICICI Securities
Upping the ante on technology?
In a recent development, Multi Commodity Exchange of India (MCX) has decided to award the contract for implementation of Commodity Derivatives Platform to Tata Consultancy Services (TCS) with a letter of intent (LoI) to TCS to commence the project immediately. We highlight key implications below:
* Will the overall cost increase? While this might be possible, the technology-related costs for MCX were comparable to NSE and lower than BSE in absolute terms. Hence, an increase in that overhead is not out of place. A reduction in the cost can be a positive surprise considering techology expense as % of revenue for MCX is 18- 20% compared to average 1.5% for NSE.
* With TCS, will MCX now be more prepared on new age technologies? In a recent discussion paper (link to our report), SEBI had pointed out that market infrastructure entities (MII) like exchanges and depositories need to invest more in new age technologies like blockchain. TCS can help MCX in that stead. For example TCS‘s Quartz Blockchain Solution has been named a leader in the Gartner Magic Quadrant. Built on coexistence, integration and interoperability, Quartz is also known to enable existing systems to coexist and
* Replacement of 63 moons as MCX’s tech vendor does end all relationships with the erstwhile promoter of MCX
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