Soon, trade in equity derivatives for longer hours

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Mumbai: Domestic stock exchanges will be able to trade in equity derivatives until 11.55pm from 1 October, the Securities and Exchange Board of India (Sebi) said on Friday, allowing an extension aimed at further integration of markets.

Currently trading in equity derivatives stops at 3.30pm. According to Sebi, longer market hours for equity derivatives will enable further integration as the commodities derivatives segment is already open for trading till 11.55pm.

The move comes after the regulator on 28 December announced a universal exchange concept which will trade in all segments—equity, currency and commodities.

“Globally, the derivative exchanges are already following the extended trading hours. The introduction of the extended hours is a positive development and will bring Indian market in line with international market and Indian commodity derivative markets,” said Ashishkumar Chauhan, MD and CEO, BSE Ltd.

Vikram Limaye, who heads the National Stock Exchange of India Limited (NSE), said “We should be ready with framework for extended trading hours well before October. As far as products are concerned, Sebi has not restricted it to just indices or index futures. We will have a discussion internally as well as with market participants before deciding on products that will trade for longer hours.

Stock exchanges that are keen to extend market hours have to seek approval from Sebi.

“Prior approval from Sebi shall be sought along with a detailed proposal including the framework for risk management, settlement process, monitoring of positions, availability of manpower, system capability, surveillance systems,” Sebi said in a circular.

A senior brokerage executive said the extension of market hours will be easier for national-level brokerage firms as they have the resources to accommodate the required man-hours.

“It is an expanded window and most of the national brokerages will be able to transition easily. Small and medium-sized brokerages may find it difficult as for them the resource requirement for the transition would be just double. For us it would be a smooth graduation as 40% of trading happens through mobiles and we have central dealing rooms for high net worth,” said Arindam Chanda, CEO, IIFL Securities Ltd.

While brokerages welcomed the move, they said extended trading hours should be restricted to indices.

“ANMI’s recommendation is to extend trading only in indices and to begin with index futures. This would be enough to allow investors to hedge their portfolios in market-moving events. Allowing extended trading in single-stock derivatives would be detrimental as the underlying is not trading. World over, typically the practice is to allow trading in indices beyond normal trading hours. If extended trading is allowed in single-stock derivatives, then corporate announcements may be prone to abuse,” said Rajesh Baheti, president, Association of National Exchanges Members of India (ANMI).

IIFL’s Chanda agreed, but said this is the just the initial announcement.

“According to me, extending market hours for the entire market could be done in phases. To begin with, it could be for indices and then extend to single stocks and other segments,” said Chanda.

Separately, according to a 9 April Mint report, the market regulator is in discussions with RBI to extend trading hours in currency derivatives. livemint