An issue which got announced and took notice of everyone about ten days back is the extension of trading hours.

In an interview with CNBC-TV18, Joseph Massey, Managing Director and Chief Executive Officer of MCX Stock Exchange, spoke about his reading of the market and his view on the extension of trading hours.

Below is a verbatim transcript of an exclusive interview with Joseph Massey on CNBC-TV18. Also watch the accompanying video.

Q: Why do you think this is not the right way to go for the equity markets because your point seems to be that it may make sense for other asset classes like currencies but not for equities?

A: This is a good move that market timings must get extended. We must congratulate the regulator for having taken the decision. The two principal thinking of extension of timing were to align our markets with the Western and the Eastern markets. The argument put forth for the Eastern market was that Nifty was getting traded on Singapore. As a result of it, we were losing out business there. Hence, we must first align ourselves with the Singapore stock exchange. The industry was largely of the opinion that only global asset classes should get impacted by the international markets. Therefore, we must extend the timing in the evening session. We found that even if we extend time to 9 o’clock, Nifty starts at 9 o’clock Singapore time, which is 6:30 in India. Coincidently, Nifty trades till midnight Singapore time. Therefore, Nifty is available for nearly the whole day till midnight. We are closing our markets at 5 o’clock. So we believe, while the decision of extension is good but only global asset classes get impacted by this extension of time. So if we were to extend and align our markets with the Western time possibly, it will have greater benefit to the Indian economy   

Q: Do you disagree that an extension for equity markets should not cause any strain on the system?

A: I certainly agree. I think brokers are groomed because we have seen some asset classes where trading is going on till about 11:30. I believe that the industry has already migrated to the level. The broad base argument was to align the market with the Western market and the other argument that was being put forth to the regulator was to align them with the Eastern market. This is the broad range discussion that the greater benefits will percolate if global asset classes were available during global time. I am sure the regulators have heard all the exchanges. The decisions for it will also be taken. So we are moving the right path and gradually we will see extension of time beyond 5 pm also.

Q: The third argument was that that this is ostensibly being done to pullback volumes that were being generated on the Singapore Exchange Ltd (SGX) Nifty in Singapore and that something we were losing out on. What about that?

A: Singapore starts at 9 am which is 6:30 India time. Therefore, essentially we have already lost out of whatever lead that is possible. This is an agreement between National Stock Exchange (NSE) and SGX. I am sure if NSE insists SGX that this asset is a domestic asset and it could be traded only during the time, which is favourable to NSE, they should be complying with it. However, Nifty anyway gets traded till midnight in Singapore. We are still halting the market at 5 o’clock. So that argument also of getting volumes back is only partly met.

Q: What’s the point of doing this? If you are not able to catch the SGX volumes and your trade is ending at 5, which is two hours before the US trade begins, which is the mother of all markets, which means you are not aligned to the US markets in any case. What does 9 to 5 extension achieve?

A: Based on the feedback that went from the industry, because NSE is a premier institution, they gave lot of arguments from the brokers and themselves. So maybe the decision must have been at this juncture we will go from 9 to 5. In phase two it will go beyond 5 o’ clock. However, we are happy that regulator has agreed to extent the market. So we believe the phase two will get implemented in the near future and once that gets done the actual benefits will flow to the economy.

Q: Are you saying that eventually we will have 24 hour trading?

A: The way global markets are operating, derivatives, which are risk management tools are available for near 24 hours. The cash market works in a very narrow range; there could be about for six, eight or 12 hours, but the currency market on CME works for 23 hours. Similarly, the other debt index instruments are available for nearly 23 hours and debt is available for 23 hours. So I believe that derivative products do trade nearly 23 hours and it just that global firms operate different desk in different time zone. I am sure Indian industry is also gravitating to that level where they will have multiple shifts and they will be handling different time zones through different teams.