Just days after all the major commodity exchanges in the country slashed their trade timings to 5 pm from 11.30 pm owing to the coronavirus-linked lockdown, the brokers’ association has made a U-turn on the issue and approached the market regulator to restore the previous trading hours.
On April 1, two days after the new timing took effect, the Commodity Participants Association of India (CPAI) has written a letter to the Securities and Exchange Board of India (Sebi) for restoring the old timings.
All the three major commodity exchanges ― Multi Commidity Exchange (MCX), National Commodity and Derivatives Exchange (NDCEX) and Indian Commodity Exchange ― had implemented the shorter trading hours on March 30. The decision was taken by the regulator after several meetings with brokers and exchanges.
The surprise move is expected to upset the Securities and Exchange Board of India (Sebi), a source close to the development said.
According to the CPAI’s letter, a copy of which has been reviewed by Moneycontrol, the reduced trading hours is detrimental to the business. "Recently many members informed us that the reduced trading hours may deprive their clients and various market participants of accessing the market when the trading and volatility peaks at international commodity exchanges and this could pose a greater risk of adverse gap up or gap down in our market when they open at 9.00 am the following day,” the letter reads.
A senior CPAI official told Moneycontrol: "We did a survey of members yesterday for rolling back new timings. In the survey, approximately 70 percent members were in favour of the roll-back as their operations have comparatively improved in last 5-6 days. We have shared these figures with exchanges and the regulator."
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In fact, Sebi was cautious about pricing of agriculture commodities without spot market due to the lockdown in the country. But exchanges were not in favour of a total close down. Many brokers then said that there were difficulties for them to work in double shifts from 9 am to 11.30 pm, and sought reduced trading hours.
However, large commodity brokers were not in favour of cutting down trading hours. According to them, non-agri commodities react mainly after the US market opening in the evening and nobody will trade in non-agri segment if the Indian market closes early. On the other side, without spot market in agri segment, there is already chance for manipulation.
A source in the market told Moneycontrol: "Some North-based clearing members were putting pressure on the association for shorter market timings in equities and commodities. If trading hours are reduced in commodities and equities, that would help in mitigating risk in an extremely volatile market where global factors play a predominant role."
Clearing member clears trade on behalf of brokers and pay money to clearing corporations.
Analysts were expecting a 50 percent reduction in volume due to the shorter timing.
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