The Securities and Exchange Board of India (Sebi) is examining the option of extending trading hours on the financial exchanges to align these with international markets — a move that drew mixed response from market participants.
"It is important to align Indian markets as far as possible with those of the international markets to facilitate the assimilation of any economic information that may flow in from other global markets," the market regulator said in a discussion paper released today. It has asked for feedback from market players by April 10.
Trading hours for the equity cash market and exchange-traded derivatives market in India are from 9:55 am to 3:30 pm, shorter than those for currency futures and commodity futures. But some exchanges in other countries have much longer trading hours for the futures segment, sometimes extending even up to 23 hours, the Sebi discussion paper pointed out.
| A QUESTION OF TIMING Market timings of various products/markets in India |
| Cash market 9:55 am to 3:30 pm |
| Equity derivatives 9:55 am to 3:30 pm |
| Currency derivatives 9:00 am to 5:00 pm |
| Commodity derivatives 8:00 am to 11:30 pm |
| Power exchange 10:00 am to 12:00 noon |
Sebi said an extension of trading hours could enable the domestic market to take advantage of movements in international markets, make markets more efficient and attract trading interest.
On an earlier occasion, the National Stock Exchange (NSE) had requested Sebi to start index contracts futures trading at 8 am, instead of 9.55 am. NSE futures is also listed on the Singapore Stock Exchange (SGX), where trading starts over two-and-a-half hours before NSE. Nearly 40 per cent of Nifty futures volumes has shifted from India to Singapore over the past few months.
The regulator, however, cautioned that an extension of trading hours raised risk management concerns and a potential need for higher margins.
Talking to Business Standard, former NSE Managing Director R H Patil said, "It would be a good move if it is introduced in stages. But the regulator should ensure that proper infrastructure and a well laid-out risk mitigation strategy are in place before it is implemented."
Reliance Money CEO Sudip Bandyopadhyay said trading could start at 8 am and end at 6:30 pm, so that Indian markets could align better with Europe, US and other Asian markets.
Another section, however, felt that extending trading hours in a hurry would lead to chaos. "The banking system in our country is not on a par with the clearing and settlement system. The concept of real-time gross settlement of payments is practically not available at a lot of bank branches. All this needs to be upgraded before the trading hours are extended,” a trader said.
In January 2008, the cheque-clearing system suffered a major setback, as two initial public offers from Future Group and Reliance Power, which had seen record applications from both domestic and foreign investors, were scheduled back to back.
They also pointed to relatively higher transaction costs. "Futures volumes shifted to SGX not only because of the differential in trading hours but more due to the higher trading costs in India," added Nirmal Agarwal, president of the Association of NSE Members (ANMI).
