The Securities and Exchange Board of India (Sebi) is studying a proposal submitted by exchanges to extend trading hours of the currency futures segment in line with commodities as both are linked closely with each other.
If Sebi approves the demand, trading hours of currency futures will be extended to 11.30 pm from the existing 9 am to 5.30 pm. Internationally trading in futures continues for nearly 23 hours a day. Traders feel it is high time that India gradually moves towards adopting that practice.
This is also in line with the existing trading practice in commodity futures exchanges, where trading continues up to 11.30 pm for gold and other commodities with global references. Gold trading on commodity exchanges is a major volume generator and prices move in tandem with the movement in currency, especially the US dollar. As dollar movements are volatile, traders in currency futures per se also want extended trading hours for currency futures.
For Sebi, the idea would be an extension of its thinking for equity derivatives, where the regulator is considering the National Stock Exchange’s (NSE’s) request to start Nifty futures earlier than the start of the spot market. NSE has proposed to prepone timings for trading in Nifty futures to 8 am as it is already generating big volumes in Singapore stock exchange before Indian stocks open. If the trend in the Indian market is decided by Singapore, then local traders would be at a loss, said a trader.
“We have submitted our request to the equity market regulator to extend timing of currency futures trading for the convenience of market participants, who can comfortably mitigate their hedging risks,” said a top exchange official on condition of anonymity.
Currently, MCX-SX, NSE and BSE offer futures trade in dollar. But, local traders feel the pinch of market volatility as trading in the domestic currency markets closes for the day by 5.30 pm.
There exists an intricate linkage between commodity prices and movement of global currency prices. This linkage assumes importance, especially in commodities like gold, copper, zinc, edible oil, crude oil and petroleum products in which India has a large exposure to global markets, as India is a major importer, consumer and exporter of some of these commodities and their derivatives.