Longer currency trade time on agenda

On exchanges' renewed request, Sebi asks for market feedback; proponents say needed to develop this segment

The exchanges have revived an earlier effort for regulatory approval to extend the trading hours in their currency segments, in the wake of the heightened volatility in the rupee.

The MCX-SX and National Stock Exchange have approached the Securities and Exchange Board of India (Sebi) for an extension of trading hours in the currency derivative segment to 11:30 pm from the present 5:30 pm. Sebi has told the exchanges, in a communication seen by Business Standard, to ask market participants and intermediaries for their views.

When asked, an MCX-SX spokesperson said, “Market research and the process of gathering feedback from market participants is an integral role of any exchange. Our research department conducts various surveys on an ongoing basis for feedback to industry bodies, research institutes, regulators and policy makers. It will be inappropriate for us to comment anything beyond this in the above matter.”

NSE declined to comment. Sources say both MCX-SX and NSE are in the process of collecting views from participants. MCX-SX is said to have collected views from about 400 companies and is targeting 100 more.

Both exchanges and other market participants have for three years been requesting an extension for the segment. The latter say this is a “critical requirement” for development of the Indian currency markets.  

“The rupee is a globally traded commodity and is constantly moving. So, trading hours in the rupee need to be long enough to capture both the London and New York markets. This exposure to international markets is critical for our currency market,” said Sudip Bandyopadhyay, managing director and chief executive of Destimoney Securities. The London market opens mid-day according to Indian Standard Time  (IST), while the New York market opens at 7 pm IST.

Market participants believe apart from aligning India to the international markets, the extension will also help reduce volatility in the segment.

“The time difference between the closing of the Indian markets and the opening of the US markets creates huge volatility in the dollar-rupee trade. Often, the market opens with a huge gap, up or down. So, it (the extension) could help in reducing this sort of volatility,” said Hemal Doshi, chief currency strategist, Geojit Comtrade.

However, some quarters are not in favour of an extension due to possible hurdles in settlement. “We are wondering how RBI (the Reserve Bank) would be able to manage the spot positions issue. Spot positions cannot be kept open for a long time because the settlement will take longer. Banks also do not deal in any major currency settlements post 5 pm,” said a currency analyst from an Indian brokerage.

Not all market participants feel trade settlement is a concern. “Indian markets have the infrastructure to handle any issue regarding settlements. When commodity trade settlements can happen at midnight, there should be no problem on the currency side either,” said Amit Majumdar, executive director at Angel Broking.

The extension would also be beneficial to the hedging community as they’d be able to hedge at exchange rates, said participants. LONGER CURRENCY TRADING HOURS?

• MCX-SX and NSE seek extension of trading hours on the currency derivative segment
• Ask Sebi to extend trade-closing time to 11:30 pm from 5:30 pm
• Sebi directs bourses to gather feedback from market intermediaries
• Participants believe move could help reduce volatility in the segment