Sebi allows commodity derivative trading on domestic exchange from 9 AM

Traders feel the need to deploy more manpower without actually seeing much additional business

Markets regulator, the Securities and Exchange Board of India (Sebi) has extended trading time for commodity futures on domestic exchange in order to align prices of underlying in local markets with international trading platforms. Trading will start from 9 am in line with equities and currencies.

A Sebi circular issued on Friday, said, “In order to deepen the commodity derivatives markets as well as to enhance the participation of stakeholders such as farmers producers organizations (FPOs), value chain participants, foreign entities having actual exposure to Indian physical markets etc., as recommended by the Commodity Derivatives Advisory Committee, it has been decided to extend the trade time within which recognized stock exchanges can set their trading hours for their commodity derivatives segment.”

Currently, the commodity futures trading starts at 10AM which continues till 5 PM for domestically linked agri commodities like isabgul seed, guar seed etc and upto 9.30 PM for globally linked agri and processed commodities like kapas, crude palm oil (CPO) and refined soya oil.

Now, Sebi has empowered stock exchanges trading in commodities to advance start trade time by 1 hour to 9AM across all commodities and extend end time by 1.30 hours to 9PM in agri and processed contracts. Non-agri commodities, however, continued to see closing time at 11.30PM and 11.55PM depending upon on daylight in spring season and fall season respectively. Along with exchanges, clearing corporations with commodity derivatives segment may fix their trading hours between stipulated time of 9AM to 9PM. The new trading time is applicable from January 1, 2019.

Sebi, however, has clarified that the extension of the trade timing is subject to the stock exchange and its clearing corporation(s) putting in place adequate risk management system, surveillance system and infrastructure commensurate with the increased trading hours.

“It is a welcome move which will align currency and equity markets together with commodities,” said Naveen Mathur, Director, Anand Rathi Shares and Stockbrokers Ltd.

The extension in trading time is set to help hedgers and arbitrageurs to trade on exchange platform after finishing off their work in spot market which mostly close by 5PM across the country. For which, however, they require to keep adequate margin money with brokers in advance.

Interestingly, stock brokers would require to deploy additional manpower to monitor extra risk associated with the extended trading hours. Already, broking fraternity is working in two shifts. Increasing trading timeline would require to add one more shift of skilled manpower which would add to the existing cost.

“We will have to see whether the additional cost is yielding any extra business to us only then, extended trading time would be beneficial,” said Pritam Kumar Patnaik, Business Head, Commodities, Reliance Commodities Ltd.

Commodity brokers, however, see hardly any increase in business volume between 5PM and 7.30PM due to the lack of price linkage between spot and futures.