Long trading hours fail to enthuse brokers; bourses may go for 12-hr window

Both NSE and BSE plan to give their plan on extension of trading hours in the next few weeks

While the Securities and Exchange Board of India (Sebi) has allowed stock exchanges to keep the equity derivatives market open for 15 hours, this might not entirely happen.

According to sources, the exchanges might initially opt for a 12-hour trading window, based on the feedback from market participants, particularly brokers.

Both the National Stock Exchange (NSE) and BSE plan to give their plan on extension of trading hours in the next few weeks.

Sebi had in May allowed the exchanges to keep the derivatives market open till 11:55 pm. Currently, the timings for both the equity cash and derivatives segments are 9 am to 3:30 pm. Sebi had said the move would come into effect from October 1, after it vetted exchanges’ readiness.

Sources say brokers had expressed concern over extending of trading hours till midnight. There is also lack of certainty about volumes in the late hours.

Any extension to the trading hours, smaller players worry, would increase their fixed costs, as they would need additional people. Also, brokerages have to compile several end-of-day reports that are sent to the stock exchanges. If trading is allowed until midnight, it would be difficult to so so before the market again opens for trading.

The bourses are also unsure about volumes during the later hours, especially after 9 pm. 

Sources say all the big-size brokerages are planning a small 10-15 member desk for handling extended trading hours. “To begin with, we might extend timings only till 8 pm or 9 pm. If volumes pick up and all stakeholders come on board, we can subsequently extend these,” said an exchange official.

Brokers have also been lobbying to keep limited products, such as the Nifty and Bank Nifty, open until late hours.

“The idea of Sebi seems to be to provide effective risk management tools for investors. In this context, it will be sufficient to keep basic hedging products such as index options and futures open for the late hours. Keeping those products which see less volume open for late hours doesn’t make commercial sense,” said Alok Churiwala, managing director, Churiwala Securities.

The move to extend trading timings was aimed at aligning Indian markets with global exchanges, such as the Singapore one, which keep their platforms open round the clock.

Sebi had earlier allowed the exchanges were allowed to keep their cash markets open until 5 pm. However, no exchange has used the facility.

Allowing the derivatives market to trade longer than cash markets allows investors to hedge their portfolio risks more efficiently. Until now, foreign institutions were in an advantageous position compared to domestic institutions in hedging their equity portfolio through derivatives. Offshore exchanges such as the SGX and CME where Indian contracts would be traded are open round the clock and foreign portfolio investors (FPIs) could hedge their risks in the light of any late developments. 

Recently, Indian exchanges snapped all  data sharing agreements with foreign peers. Hence, even FPIs are now forced to take positions through onshore exchanges such as the BSE or use the International Financial Services Centre  at Gift City in Gujarat. Hence, longer trading hours was thought necessary.

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