Because a commodity index constitutes commodity ‘futures’, which have expiry dates, every constituent contract of a commodity index is rolled over from expiring contracts to new contracts, on pre-decided ‘roll dates’. For MCX iCOMDEX indices, the roll from the front expiry month to the immediate next expiry month of a contract takes place during the rollover period. ‘Front expiry month’ contracts are those near-month expiry contracts which have not entered tender/delivery period, and whose expiry date is after the immediate next rollover period. The rollover dates for the of MCX iCOMDEX Bullion Index and of MCX iCOMDEX Base Metal Index are the two trading days immediately preceding the tender start date of the of the respective index constituents.
The mechanism is illustrated with the Gold Index which forms part of MCX iCOMDEX Bullion Index:
- On 10th March 2020, Gold (1 kg) April 2020, June 2020, August 2020, October 2020 December 2020 and February 2021 contracts are available for trading on MCX.
- The Gold (1 kg) 3-April-2020 contract is the front expiry month contract that has tender/delivery period from 30th March 2020 to 3rd April 2020.
- Hence, the rollover days of Gold Index during March are 26 and 27 of March (as 28 and 29 March 2020 are holidays).
- As the 3-April-2020 contract enters into tender period before the next rollover days falling in April 2020, the contract based on which index is computed is rolled over to June 2020 during 26 – 27 March.
In contrast, the Silver Index (also part of MCX iCOMDEX Bullion index) does not rollover on these dates in March as the nearest expiry Silver (30 kg) contract on 26 – 27 March 2020 is the 5-May-2020 contract. This contract enters into tender period only after the roll-over days of April 2020, making the Silver Index roll over only in April, as illustrated below.
- During April 2020, for Silver (30 kg), the front expiry month is the 5-May-2020 contract, whose tender start date falls on 29th April 2020 and the rollover days on 27 – 28 April 2020.
- On these rollover days of April, the contract based on which Silver Index is computed, gets rolled over from 5-May-2020 to 3-July-2020 contract.
- On the other hand, on these rollover days of April, for Gold (1 kg) the front expiry contract is the 5-June-2020 contract whose tender period starts from 1 June 2020. Hence, the Gold Index is not rolled over on 27 – 28 April 2020, but will do so only in the rollover days of May.