The Multi Commodity Exchange of India (MCX) and the National Stock Exchange of India (NSE) on Thursday announced the withdrawal of additional margins imposed earlier this month on gold and silver futures contracts, signalling a moderation in volatility across the bullion market.
MCX stated that the 3% additional margin on all gold futures contracts and the 7% additional margin on all silver futures contracts have been removed with effect from February 19, advising clearing members to take note and adjust accordingly.
In a parallel move, NSE Clearing Limited confirmed that the additional margins of 3% on gold futures and 7% on silver futures, introduced on February 4 as a precautionary risk measure, will also stand withdrawn from Thursday. Members have been instructed to suitably realign their positions.
Background: Volatility Triggers Risk Controls
The exchanges had introduced the higher margin requirements following sharp and rapid price movements in precious metals earlier this year. Gold prices surged nearly 35% in January, raising concerns about excessive leverage and heightened speculative activity. However, prices have since corrected by roughly 15%, helping ease volatility pressures.
Impact on Traders and Market Liquidity
With bullion prices stabilising, the rollback of additional margins will:
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Lower capital requirements for traders
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Improve participation and liquidity in domestic futures markets
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Reduce trading costs for both hedgers and speculative participants
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Enhance overall market efficiency
The decision is expected to support healthier trading conditions while maintaining prudent risk management.
Global Context
The move aligns with broader global trends where exchanges actively recalibrate margin requirements in response to extreme price swings. Recently, CME Group had raised margins on Comex gold and silver futures following one of the steepest declines in bullion prices in decades.
Frequently Asked Questions
Why did MCX and NSE withdraw the additional margins?
The Multi Commodity Exchange of India (MCX) and the National Stock Exchange of India (NSE) removed the additional margins after volatility in gold and silver prices moderated. The higher margins were initially introduced as a precautionary risk measure following sharp price swings earlier this year.
What were the additional margins that have now been removed?
Gold Futures: 3% additional margin
Silver Futures: 7% additional margin
These were over and above the normal initial margin requirements and were withdrawn effective February 19.
How does this impact traders and investors?
The rollback reduces capital requirements for holding futures positions. This means:
Lower trading costs
Improved liquidity
Higher participation from both hedgers and speculative traders
Better flexibility in position management
Does this signal that volatility in bullion has completely ended?
Not necessarily. While volatility has cooled compared to January’s sharp surge and subsequent correction, precious metals remain sensitive to global macroeconomic developments, interest rate expectations, geopolitical risks, and currency movements.
Is this margin adjustment part of a global trend?
Yes. Exchanges globally adjust margins based on market conditions. For instance, CME Group recently raised margins on Comex gold and silver futures during extreme price movements. Such recalibrations are standard risk management tools used by exchanges worldwide.
