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After thorough deliberation, the Board of the Association of National Exchanges Members of India (ANMI) has approved an extension in trading hours for index futures. Previously, SEBI Chairperson Madhabi Puri Buch had spoken about varying opinions within the broking community, indicating ongoing discussions. Buch had remarked, “It's a divided house, and we have yet to gather input from investors.”
The National Stock Exchange (NSE) submitted a proposal to SEBI last year, requesting an extension of trading hours for index futures from 6 pm to 9 pm. However, this was met with scepticism from smaller, traditional brokers, who anticipated additional resource allocation for an evening trading desk if market timings were changed.
Recent information from ANMI suggests that smaller brokers have consented to the proposed alterations. According to the NSE proposal, there would be evening sessions between 6 pm and 9 pm initially, alongside regular trading hours. In a subsequent phase, index derivatives trading might extend until 11:30 pm.
Concerns weren't limited to smaller brokers; some other market participants too expressed apprehension, citing potential impacts on work-life balance due to extended trading hours.
However, it's important to recognise that an open exchange does not mandate trading activity. Many major exchanges worldwide operate for extended periods. Additionally, extending NSE trading hours should be manageable if smaller brokers are able to currently manage commodities trading until midnight without issue.
One needs to understand the need for extended hours in a world where the market is impacted by news from anywhere in the world. One reason is that we have seen volatility increase and post-market developments see the market open with huge gaps over the past few years because markets have become more connected. While there is some overlap between domestic and European market timings, our markets are closed when the US is open.
Wars, financial crises, central bank announcements, terrorist attacks, and natural disasters are all affecting markets more severely than they used to be earlier. Part of the panic reaction could be the increased participation of retail traders globally.
Extended hours allow traders to hedge their portfolios in derivative markets, mitigating potential losses. While only index futures are traded during these hours, that provides a means to safeguard positions amid market fluctuations.
Despite extended trading, the bulk of trading activity in such markets occurs during regular working hours only. Extended hours primarily serve to address international developments, offering traders a chance to react to global events and potentially reduce market gaps.
Currently, international traders enjoy round-the-clock trading via GIFT Nifty, granting them an advantage over Indian traders. A phased extension of trading hours aims to level the playing field and enable Indian traders to respond to global events, potentially reducing market volatility.
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