With SEBI deferring the October 1 deadline for extension of trading hours for equity derivatives, it gives rise to the question whether it is a dying need and, is the market ready to embrace the proposition?
After speaking to several broking houses on the subject, it was evident that none of them are ready for long hours yet. Reasons are plenty.
“What was the rationale behind extending trading hours? We are not complaining against the move but we do not see any cost-benefit analysis. Apart from automated traders, who will stay awake till midnight for trading?” said Alok Churiwala, MD, Churiwala Securities.
In May this year, SEBI allowed stock exchanges to extend their trading up to 15 hours (between 9 am and 11.55 pm) in the equity derivative segment, to remain at par with international markets. “Trading till midnight means doubling of manpower. But, we do not see income doubling if trading hours are extended,” opined Churiwala.
However, is it really a dying need of the market or its stakeholders?
He added, “It does not make sense to blindly follow the global markets. We need to understand whether we need it at all?”
Following a resistance from the stakeholders, the decision has been put on hold at least for the time being. Speaking on this, Kamlesh Shroff, CEO and Founder, Omniscient Securities, said, “It was a good move by the exchanges and SEBI to not to take a hasty decision and going ahead with the idea immediately. This being a very important decision, a cost-benefit analysis along with concurrence of market participants would be necessary for a smooth transition.” He further stated, this resolution will massively impact the markets.
When asked about the reasons behind putting the decision under pause, Vallabh Marfatia, Equity Research Analyst, Tradebulls, said, “The main reason to cancel the extending hours was that brokers’ cost outweighs the revenue generated by extended timing. The debate is on hold and many factors are being looked upon.”
According to Churiwala if the traders are bothered about missing out on trading along with the Singapore market, which opens before the Indian markets, then they can trade from India International Exchange or India INX in Gujarat International Financial Tech (GIFT) City. India INX is a wholly-owned subsidiary of the BSE and India’s first international exchange in International Financial Services Centre. For global participants, India INX offers an opportunity to trade for 22 hours a day. “If you need to trade for 24x7 for 365 days, then rest of the ecosystem has to match up to it. It cannot be done in a piecemeal manner,” he further added.
Shroff also said that, almost 24 hours trading proposition is available at the GIFT city for overseas investors to play on and thus “the question is, whether it is really necessary to consider increasing trading hours on the domestic bourses too.”
“The current volatile market throws up a question for managing the risk for long hours of trading. There would be an increase in the cost of staff, infrastructure and capital. An internal batch poll showed that almost 95 per cent of people voted against extending trading hours. It is desirable to consult market players before finalising on the decision,” he added.
aparajita@outlookindia.com