Extended hours put on back-burner

Most market participants oppose plan to increase timings of stock exchanges.

Strong opposition from market participants has made stock exchanges put their plans to extend trading hours on the back-burner.

The National Stock Exchange (NSE), which was advocating extension of trade timings, now says the majority of market players are against the move and a consensus is needed for it to go through.

Over 60 per cent brokers, out of the 395 surveyed by the Association of National Stock Exchange Members of India (Anmi), expressed displeasure at the move. Anmi has about 800 members, quite a few of whom are also members of the Bombay Stock Exchange (BSE). The findings of the survey were given to both NSE and the Securities and Exchange Board of India (Sebi).

Sebi had last month approved the extension, if stock exchanges so chose, of trading timings by two-and-a-half hours (from 9 am to 5 pm). The current market hours are 9.55 am to 3.30 pm. Stock exchanges had sought extended timings to integrate Indian bourses with Singapore and other Asian markets in the morning and European markets in the evening.

In Singapore, which is around two-and-a-half hours ahead of India, trading is held between 9 am and 12.30 pm and 2 pm and 5 pm (local time). Due to this mismatch, NSE was losing some derivatives volumes to Singapore, where the Nifty (its benchmark index) is listed. Hedge funds trade Nifty in Singapore prior to the opening of Indian markets.

NSE Managing Director Ravi Narain had said that extension of trade timings would increase volumes in domestic stock markets by 20-25 per cent. However, the move has met with strong resistance from stock brokers and traders.

“Unless market participants seriously want it, the hours should not be extended. The current trading hours are enough. The longer the trading hours, the lesser will be the depth of the market. Post-trading processing remains a major challenge,” said a former chief executive officer of BSE.

However, foreign institutional investors (FIIs) have a different view. “Extension of trade timings will make domestic markets more competitive. Soon, domestic traders will have to get accustomed to global trends as financial markets are becoming more integrated,” said a fund manager of a Singapore-based FII.

“The derivatives trading in US and European markets is conducted on a 24-hour basis. FII money moves Indian markets and a majority of these institutions are in Hong Kong and Singapore. They trade minute by minute and do not wait for Indian markets to open. India is under threat of losing substantial trading volumes in its most liquid contract to the Singapore market and extension of trading hours could be one way of steming this flow of volumes,” said Saurabh Mukharjea, head of equities at Noble, which provides research advice to FIIs.

Domestic stockbrokers say extension of trading hours may put pressure on infrastructure of exchanges as well as market intermediaries and broking companies may have to incur additional costs. Moreover, to obligate margin/collateral requirements of investors, banks/financial institutions may need to keep their offices open for an extended duration.

“The domestic banking system is not on a par with the clearing and settlement system. The concept of real-time gross settlement of payments is not available at a lot of bank branches. All this needs to be upgraded before the hours are extended,” said an Anmi official.