The thesis with which we entered MCX in Dec 2017 is playing out well, however an adverse regulatory development the very next day of our buying is like a hanging sword- universal exchange regime that kicks in on 1st October 2018, a month from now, will see entry of NSE and BSE in commodities.

We still stayed invested as there has been a strong case of consolidation in exchanges, however that hasn’t happened yet.

Given network effect acts as a wide moat for incumbents in exchanges, eventually NSE & BSE may not be able to take away any market share just like BSE failed in Equity F&O.

However, in the interim we could see MCX retaliating with price cuts and other favorable terms to intermediaries leading to margin erosion. This could go on for long given both new players have deep pockets.

As minority investors, do we want to go through that? We have the liberty of exiting, albeit at a marginal loss, while avoiding the opportunity cost of staying invested in this trying phase. Key upside risk remains any M&A action wherein MCX gets merged with either NSE or BSE.

Exit MCX fully at current market price.