Extended trading hours: Pain for traditional brokers, gain for digital brokers?

The NSE is awaiting approval of the plan by the Securities and Exchange Board of India. While it is too soon for an estimate, some experts said costs could rise by about 10 percent

The National Stock Exchange of India’s plan to add a trading session for index options and futures from 6 pm to 9 pm has placed brokers at the crossroads of incremental revenue and rising costs.

For the proposed session that will start two and a half hours after the regular 9:15 am to 3:30 pm session ends, most broking firms will have to hire additional employees, resulting in a bump up in headcount and salaries.

“We will have to add 20-30 more people at our centralised desk to take care of evening operations,” said Dhiraj Relli, managing director of HDFC Securities.

Even small brokers will need enough resources to help with account opening and on the tech and customer support side to address client issues. The additional headcount will be over and above the team for live commodity trading on the MCX till 11:30 pm.

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The NSE is awaiting approval of the plan by the Securities and Exchange Board of India. While it is too soon for an estimate, some experts said costs could rise by about 5-7 percent for discount brokers and by 10-15 percent for 'call-and-trade' traditional brokers.

This means stockbroking is slowly becoming a manufacturing setup, with people working in shifts and groups, said Trivesh D, chief operating officer of Tradejini, a bootstrapped stockbroker incorporated in 2012.

“We will see at least a 5-10 percent increase in headcount if SEBI approves NSE’s proposal,” he added.

Branch resources

HDFC Securities, Motilal Oswal Financial Services, IIFL Securities and other traditional brokers do not see the need to hire additional staff for their branches in smaller cities and towns.

“At the branch level, we have relationship managers who largely help clients with research, recommendation and cross-selling of mutual funds. More than 92 percent of our customers transact digitally, so there’s no need for incremental resources at the branch level,” said Relli.

Traditional brokers have been ramping up their digital interfaces to take on big fintech brokers such as Zerodha and Groww and cater to Gen Z and millennial F&O traders.

HDFC Securities launched its HDFC Sky app and JM Financial is beta-testing the new-age BlinkX app. This would ensure that evening F&O trading sessions require minimal human intervention.

"There is likely to be a spike in costs, although it will be less for pure digital brokers compared to offline brokers. It is in this context that we are putting in place an operating system with minimal manual intervention. It looks like machines are coming of age in stock markets in a big way," Gagan Singla, managing director at BlinkX said.

Grey area

The executive of a new-age broking firm, who did not wish to be identified, said it is awaiting details on the operational know-how of the evening sessions.

“Right now, brokers are required to upstream client funds before 6 pm. We are in wait-and-watch mode to see how this cutoff time as well as settlement requirement change once the evening session comes into play,” the executive said.

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If the market regulator directs the settlement process to be wrapped up that day itself, then brokers will have to take care of additional compliance requirements after 9 pm. This means more hiring on the compliance side. “It makes more sense to open a new book at 6 pm and then settle it the next day after the regular trading session,” the executive said.

However, SEBI is trying to ensure there is no misuse of client funds, so next-day settlement could be unlikely, he added.

The other aspect that brokers have to consider is the postponement of maintenance operations. Most brokers carry out maintenance of their tech infra after 3:30 pm, which will now have to be pushed to 9 pm or the weekend, said Tradejini’s Trivesh.