Brokerages urge Sebi to modify plan to extend derivatives trading hours

Local and foreign brokers have asked the Sebi to postpone until January its plan to introduce longer trading hours, citing the need for more testing

Brokerages are urging India’s market regulator to modify a plan to extend equity derivatives trading hours due to concerns over their readiness and the costs of implementing the proposal, according to people with knowledge of the matter.

Local and foreign brokers have asked the Securities & Exchange Board of India (Sebi) to postpone until January its plan to introduce longer trading hours, citing the need for more testing, the people said. They also discussed extending the trading time till 5 p.m., a shorter day than the 11:55 p.m. close that Sebi had said it would allow, the people said, asking not to be identified because the discussions are private.

India is trying to woo foreign investors across different time zones to trade onshore after a fight between the National Stock Exchange of India Ltd. and the Singapore Exchange Ltd. left investors looking for new ways to manage their exposure to Indian stocks. The dispute between the two exchanges over derivatives contracts broke into the open in February after the NSE said it was axing licensing agreements with overseas bourses.

While the regulator wants to start the new trading hours on October 1, brokers told it that they need at least six to eight weeks to complete testing, the people said, adding that after-hours trading exposes systems to more risk as volume and liquidity may be thin in the first few months.

Brokers want derivatives trading to run only 90 minutes longer than the current 3:30 p.m. close because the cost of spending on additional headcount for a larger extension wouldn’t be justified by any increases in revenue, at least initially, the people said. Indian rules prevent global brokers from trading derivatives from their offshore desks in Europe and the US after the local cash market shuts, the people said.

Local and global brokers informed Sebi about their concerns over the extended trading hours at a meeting earlier this week, in which the regulator asked them to submit their final responses by the end of Friday, the people said.

A spokesman for Sebi didn’t respond to an email seeking comment.

Sebi first announced plans to allow India’s exchanges to extend equity derivatives trading hours in May, bringing it in line with commodities trading, which already runs until 11:55 p.m.