The issue of sun-outage

SMARTSHARE

The broking community is perhaps the most regulated in the entire Indian services spectrum. It has virtually reinvented itself after a series of high-voltage reforms and changes.

The changes have happened at such rapid pace that there is no parallel in the world markets where screen-based trading, dematerialisation, introduction of stock derivatives and demutualisation of the exchanges have taken place in such a short span of time beginning 1994.

If Darwin were alive, he would have certainly given the trophy of the most versatile species to the Dalal Street brokers, who have had to frequently go back to school to learn the tricks of a rapidly changing trade.

In order to ensure the smooth working of the stock markets and let this machinery run smoothly, it is necessary that the bourses revisit some of their existing practices that are inconvenient to traders, investors and brokers alike.

SUN DOWN PHENOMENON
Every year before spring and after the autumn equinox, the NSE experiences sun outage for a period of around 15 days each. During these times the VSATs do not receive the signal and the markets are closed for about 45 minutes around 11 am.

This year the market closure time is from 11.45 am to 12.30 pm and this will last till March 19. The NSE extends the trading hours from 3.30 pm to 4.15 pm on these days to compensate for the loss in trading time in the name of investor convenience.

The real reason for these extensions may be to compensate for the revenue loss during the sun outage as the bourses earn on every transaction that takes place and so do the brokers.

This is a waste of time. Unless the trading is interrupted in the last hour of trading there is no need to extend hours. I would go to the extent of even pleading that on the days of the sun outage let the markets open only after the sun outage period is over. In the present case, at 12.30.

DON'T POACH ON SATURDAYS
While it has so far not happened this year, the bourses test either their back-up facilities, a new site or a new programme.

This invariably happens on a Saturday. While it's all right to carry out mock testing on Saturdays, if the testing has to be live let it be on a regular day. Let the live testing session be for three hours so an extension may be made in case of any interruptions.

In the US, the bourses take their 11 federal holidays and Saturday and Sunday holidays very seriously. If one of these federal holidays falls on a Saturday, they have an additional Friday off and if the holiday falls on a Sunday then they have the following Monday as a holiday.

OPEN NEW STRIKE PRICES IMMEDIATELY
Derivative traders were put to a great hardship on March 5. As the Nifty plunged to a five-month low of 3,554, traders could only buy 3,640 Put. For those wanting to hedge their long futures, the only way to do was to pay a hefty Rs 171 premium for the 3,640 strike price. A 3,550 Put would have come nearly at half the rate. And what if some one holding the 3,640 Put wanted to do a bear spread? There was no way he could do it, except to book profits.

If the bourses can cut investor positions if additional margin demand is not met by a certain time, why can't they change their programme to let the strike price open in tandem with the cash or future prices. No matter where the underlying goes, the strike price, like the pug in a telecom services ad, goes where the owner goes.

CONSUMER IS KING
I am confident that if there is a survey to find out investor preferences , the majority would vote for reduced and convenient market timings. Reduced trading hours may result into marginal lower volumes initially, but I am confident they would rise later.

Apart from investor convenience, back office hygiene will be better, contracts would reach early, there would be more time to research, power would be saved, employee morale would be high and more importantly the broking machine would continue to generate higher revenues for the exchequer. After all this is the only source of revenue where there is no leakage.