Market fall reignites ask for 24/7 index derivatives trading

In a LinkedIn post, he wrote, "India needs a 24/7 derivatives market, and we need it now. With wild geopolitical and economic risks, from Trump tariffs to sudden global conflicts, investors face dicey overnight exposure. A round-the-clock F&O market is a critical component that can help investors HEDGE risks and salvage potential losses when the world moves while we sleep. "

"The last time I spoke about this, many assumed I was promoting speculation. I’m not. It's time we stop treating risk management like a luxury and build systems that actually reflect today’s market realities."

But Rajesh K, the director of Alice Blue broking house, said that the answer lies in changing investor behaviour and not in running 24/7 market. "How are big manufacturers and jewellers managing risk? They face frequent price fluctuations in commodities like gold and silver, yet they don't incur major losses. The reason is simple—they use proper hedging strategies to protect against volatility. In the equity market, however, most retail traders are focused on intraday positions, and very few carry naked open positions in the derivatives segment. This limits their ability to hedge or manage risk effectively. Instead of pushing for a 24/7 market, the real need is to change investor behaviour, promote strategic thinking, and enhance awareness about risk management tools like hedging and diversification."

He added that already there is a dip in volumes and number of participants after the regulatory actions to stop excessive speculation, like the October 2024 directive on index derivatives. "With such fall in volumes, what sense would it make to run the market for such long hours? We can consider extending the market hours but not agree to running it 24/7." Smaller brokers have also expressed fears that they would be able to generate enough business for these 24/7 market to compensate for the additional cost of manpower, electricity expenses, staff convenience expenses and so on.

Then there are those who point out that, even if brokerages are willing to take a chance, it may not help traders much without sufficient liquidity. An option trader who manages a hedge fund, Mayank Bansal said he does not believe that a derivatives market after regular market hours will find much traction due to a lack of volumes, at least for the first few years.

Foreign portfolio investors (FPIs) and non-resident Indians can hedge against such market moves with Gift Nifty options, but that would still leave domestic investors without such protection.

As an explainer on FYERS' website says, "Retail Indian investors are not allowed to trade in GIFT Nifty, which operates in the special economic zone of GIFT City and is primarily designed for international and institutional investors. Indian retail investors cannot participate in GIFT Nifty trading under the Liberalised Remittance Scheme (LRS) due to the Reserve Bank of India (RBI) restrictions on using the annual $2,50,000 limit for leveraged trading, including futures and options."

Also, as another market participant observed, the volumes in these instruments are still thin.

The Securities and Exchange Board of India (SEBI) would be open to extending trading hours, in line with a May 2018 circular which came into effect on October 2018, according to sources. But the regulator would need consensus among various stakeholders, including investors, intermediaries and market infrastructure institutions (MIIs) before considering any such proposal, the source added.

In 2018, SEBI had in principle permitted exchanges to set their trading hours in equity derivatives (F&O) segment between 09:00 AM and 11:55 PM. Though, the exchanges desirous of extending trading hours will have to seek prior approval from the regulator. The exchange would need to submit a detailed proposal along with framework for risk management, settlement process, monitoring of positions, availability of manpower, system capability and surveillance and so on.

NSE had proposed extending trading hours for index derivatives: in the first phase, a session between 6-9 PM was planned, this was in addition to the normal trading hours of 9:15-3:30 PM; and, in second phase, trading was to be extended till 11:30 PM. But the proposal could not gather consensus and hence was returned by regulator. SEBI is willing to revisit the proposal provided there is a consensus, said sources.