Sebi okays longer trading hours

 You could soon be able to trade for an additional two-and-a-half hours on stock exchanges with the Securities and Exchange Board of India (Sebi) on Friday allowing trading between 9 a m and 5 p m to align timings to international standards.

At present, trading hours are between 9.55 a m and 3.30 p m.

Sebi, however, raised the caveat that the exchanges would have to ensure that risk management systems and infrastructure commensurate to longer trading hours were in place before investors transact for eight hours a day.

 

The National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) welcomed the Sebi move and added that they would soon extend trade timings. They, however, did not clarify whether timings would be extended to 5 p m, though executives indicated that trading would start at 9 a m.

Last year, NSE had first proposed a change in trading hours at a time when foreign institutional investors and hedge funds preferred to trade on the Singapore Stock Exchange (SGX), where NSE Nifty futures were also listed. With longer trading hours because SGX opened for trading at around 6.30 a m India time, the open interest positions on Nifty futures traded on SGX had reached close to the levels seen on NSE.

“Extending trading hours will improve liquidity and volumes in the market,” said Motilal Oswal, chairman and managing director, Motilal Oswal Securities, adding that the move could also help shift a part of the trading back to the Indian exchanges.

Asked about longer trading hours, a BSE spokesperson said, “We welcome the Sebi directive and we are well-prepared.”

Currency derivatives trading starts at 9 a m and ends at 5 p m, so extending trading hours to equity and equity derivative segment should not be difficult.

Market participants, however, said widespread changes would be required for exchanges to allow trading for eight hours a day. Banks that are involved in settlement, brokerages and exchanges could see an increase in manpower costs , executives said.

They said the risk and collateral management systems would need to be revamped. Further, trade margins would have to be increased and the infrastructure at brokerages, banks and depositories need to be upgraded to handle the additional pressure.

"Though it's a good move that will help us synchronise with the global markets, it may affect productivity because the time for analysis will get squeezed. It will delay the net asset value declaration of mutual funds by at least an hour," said a fund manager with a domestic mutual fund.

“It’s a very positive step. It’s just that market participants will have to realign some processes to deal with longer trading hours,” said Bhavesh Zaveri, head of wholesale banking operations and cash management products at HDFC Bank, the country's largest settlement bank.

An executive at a leading settlement bank said counters would have to open around 8 a m to allow brokers to move funds before trading started. Similarly, the Reserve Bank of India would have to allow real time gross settlement up to 6 p m instead of the 4.30 p m deadline at present, another banker said.

Further, exchanges would have to realign their systems to ensure that pay-in-pay-out files related to settlements are completed faster. At present, when trading finished at 3.30 p m, banks and depositories receive the information related to payments and transfer of shares around 8.30 p m. “This needs to be crunched because we would already be open for 12 hours a day,” said a bank executive.

In addition, a bank executive said entities that are not settlement banks would also need to work longer hours to deal with broker transactions.