National Stock Exchange aims for extended F&O trading hours by March 2024

Move to accommodate interest of FPIs, introduction may take few months after receiving Sebi nod

The National Stock Exchange (NSE) may extend the market trading hours by three hours for index derivatives by March next year, in a move to accommodate Foreign portfolio investments (FPIs) with the change, indicated an NSE official. 

The extension is dependent on the approval of the markets regulator Securities and Exchange Board of India (Sebi), for which NSE filed the proposal weeks earlier.

A working group constituted by India’s largest stock exchange submitted the proposal of opening trading in index derivatives between 6 pm and 9 pm for final nod from the Securities and Exchange Board of India (Sebi). This has been decided after consultation with stakeholders for over nine months.  

"Once the regulator gives approval, we would like to give reasonable time to the market to get ready for this. Overseas investors remain on leave at the end of the year, particularly FPIs, so we do not want them to get into any pressure situation. We hope to go live in the current financial year," said Sriram Krishnan, chief business development officer, NSE.

 The NSE official added that there were some risk and surveillance aspects which need to be ironed out along with the circulation of process details with the stakeholders—all of which are to be done after the approval from the regulator.

Another key aspect to the successful extension will be the inclusion of Indian Clearing Corporation — a BSE arm. As the market regulator has brought norms for interoperability, sources said that it would be crucial to have both the clearing corporations in agreement.  

Market experts said that the extended time could bring more arbitrage opportunities for traders.

 "Some stakeholders are of the opinion that unless the cash equity segment is also open (in extended hours), single stock options and futures may not make sense. We are taking cautious steps and will test the appetite with basic index derivative products for three hours," said Krishnan.

The markets regulator had already enabled the extension to the exchanges to extend the trading hours until 11:55 PM; however, the plans have remained on the table for a long time.

While the exchange’s unit in the International Financial Services Centre (IFSC) — Gift Nifty contracts — are traded for around 22 hours, the one catering to domestic investors remains open only for six hours in a day.

As the IFSC unit does not allow domestic retail participation, NSE plans to offer extended trading hours to offer a window of opportunity to traders to hedge the portfolio risk in case of big developments from US and global markets, said the official.

Stockbrokers and market intermediaries have welcomed the plans and added that the technological developments will help lower the requirement of employees for extended hours.