Sebi extends trading hours for derivatives market till 11:55 PM from Oct 1

Currently, the timings for the derivatives market are 9:00AM to 3:30PM - similar to the cash segment

The Securities and Exchange Board of India (Sebi) on Friday allowed domestic stock exchanges to extend equity derivatives trading till 11.55 pm, in a move aimed at attracting investors dealing in Indian products on overseas exchanges in Singapore and Dubai. The new timings will also help in better alignment with commodity markets — amid implementation of universal exchanges — which function till 11:55 pm.

Currently, the timings for both the equity cash and derivatives segments are 9 am to 3:30 pm. Since derivatives trading started in 2000, the trading timings of both futures and options (F&O) and cash market have remained linked.

Longer hours for the derivatives market, which is typically used by investors for hedging, will cater to investors operating out of Europe and the US and will also provide a tool for domestic investors to price in the news flow that comes after the market hours.
 

Sebi has said the extended timings will be applicable from October 1, the date set for integration of commodities and equity exchanges. Stock exchanges that wish to extend trading hours will have to seek permission from Sebi. The market regulator will evaluate the requests based on the risk management system and infrastructure of these exchanges.

Sources say all exchanges, including the National Stock Exchange (NSE) and the BSE, will soon approach Sebi to avail of the new provision. 

Interestingly, Sebi had granted the extension of trading hours up to 5 pm for the cash segment. However, none of the exchanges opted for the extended hours on account of resistance from brokers.

Industry players say exchanges might look to extend the trading hours in the cash segment following Sebi’s latest move.

The extended timings will lead to higher costs and manpower, which could weigh on the near-term profitability of brokers, particularly smaller players.
 

Longer derivatives trading hours, however, are a trend across global exchanges. Platforms such as Singapore Exchange (SGX) and CME Group offer round-the-clock trading in key equity indices.

Shorter trading hours in India are seen as a reason for shift in domestic trading volumes to overseas exchanges. 

“Globally, derivative exchanges are already following the extended trading hours. The introduction of the extended hours is a positive development and will bring Indian market in line with the international markets,” said Ashishkumar Chauhan, managing director and chief executive officer (CEO), BSE.

Brokers are hoping that the move will increase volumes and offset increased costs.

“All the market management processes are digitised. There shouldn’t be any transition issues for brokers. However, their fixed costs could go up as the brokers will need more manpower. We hope an increase in volumes will offset the expenses,” said Motilal Oswal, managing director, Motilal Oswal Financial Services.

Wooing Investors

• Equity derivatives timings extended till 11:55 PM
• New timings applicable from October 1
• Exchanges will have to seek Sebi nod
• Sebi will examine detailed proposal of bourses
• Exchanges will have to demonstrate risk management, settlement process, manpower

Sebi has not stated if the extended trading hours will be available for both index-based products as well as single stocks. Industry body Association of National Exchange Members of India (Anmi) in a statement urged Sebi to allow only index products during the extended hours.
 

“Extended trading hours should be restricted to index derivatives alone and not cover individual stocks, as they may be vulnerable to abuse by unscrupulous elements,” said Rajesh Baheti, president, Anmi.

Exchanges have been lobbying with Sebi to extend trading hours for the last few years. The move had become even more critical after Indian bourses snapped ties with their foreign peers to curb offshore trading in Indian derivatives. 

“The move will soothe the nerves of investors, who were worried about their exposure to India in the wake of clampdown on overseas exchanges offering domestic products. US-based investors are particularly active after 8 pm India time. The latest move will cater to them,” said a hedge fund manager based in Singapore.