Sebi no to market hour extension proposal due to lack of consensus: NSE

Stock brokers not on the same page over costs, tech needs

The Securities and Exchange Board of India (Sebi) has returned the proposal by the National Stock Exchange (NSE) for market time extension in the derivatives segment due to a lack of consensus among the broker community.

The NSE filed a plea with the market regulator to keep the derivatives market open for three extra hours between 6 pm and 9 pm to help market participants gauge and act on global news flows in the evening.

However, not all stock brokers have been inclined to support this, owing to additional costs and technological requirements.

Ashishkumar Chauhan, managing director and chief executive officer (MD & CEO) of NSE, confirmed that the proposal had been shelved for now.

 

“Currently, there is no plan to extend the timings as Sebi has returned our application because the stock brokers have not provided the feedback that Sebi wanted. So, as of now, the extended time frame (plan) is shelved,” said Chauhan in an analysts’ call on its earnings on Monday.

Earlier this year, the stock brokers’ body Association of National Exchanges Members of India (Anmi) had approved the proposal.

However, the Bombay Stock Exchange Brokers’ Forum (BBF) was not in favour of the separate segment.

The markets regulator had even constituted a Brokers’ Industry Standards Forum (ISF) comprising members from three brokers’ associations to bring together a divided house and consolidate the opinion from the brokers, including that on market time extension.

According to sources, the ISF had submitted its comments on the proposal last month—neither affirming the need for extended hours nor denying the challenges.

While the markets regulator had questioned the exchange on operational issues, settlements, monitoring of positions, and risk management, several brokers raised concerns about the added cost and compliance amidst other regulatory changes, including a shorter settlement cycle, block mechanism, and upstreaming of client funds.

Brokers were of the opinion that extending hours would require technological and human resource investments and may not provide a cost benefit.

The NSE intended to allow trading in only index derivatives during the extended hours. At the time of the proposal, the exchange said it had undergone extensive consultation with market participants.

Those in favour of the proposals said the extension would have helped in hedging any negative news flow from the global markets. While Indian markets close at 3:30 pm, activity in the European market peaks around the same time. The US market activity opens around 7 pm India time.

In India, the GIFT Nifty, Nifty derivatives contracts traded in the International Financial Services Centre (IFSC), are operational for over 20 hours. However, onshore investors can’t trade in these contracts.

Some industry players also raised concerns about allowing index trading without pricing cues from the underlying stocks.

The markets regulator had earlier clarified that before allowing any extension, it would require consensus from the exchanges, brokers, and investors.

Sebi Chairperson Madhabi Puri Buch had also insisted on upgrades, system capabilities, preparedness, and added functionalities before time extension.

Industry sources said allowing extra trading hours could have also invited criticism as the derivatives market is seen as the den for excessive speculation.