The Hindu Business Line : Do not overstretch the broking machine

BROKING community is perhaps the most regulated in the entire Indian services spectrum. The community has virtually reinvented itself after a series of high voltage reforms and changes.

The changes have happened at such a rapid pace that there is no parallel in the world markets where screen based trading, dematerialisation, introduction of stock derivatives and demutualisation of the exchanges have taken place in such a short span of time beginning 1994.

If Darwin were alive, he would have certainly given the trophy of the most versatile species to the Dalal Street brokers, who have had to frequently go back to school to learn the tricks of the rapidly changing trade.

In order to ensure the smooth working of the stock markets it is necessary that the regulators do not overt stretch this fantastic money making machine. At one pretext or the other there have been frequent extensions of trading hours and extra trading days. These must stop.

Sun down phenomenon: Every year before the Spring equinox and after the Autumn equinox, the NSE experiences sun outage for a period of around 15 days each. During these times, the VSATs do not receive the signal and the markets are closed for around 45 minutes around 11 am. The NSE extends the trading hours from 3.30 p.m. to 4.15 p.m. on these days to compensate for the loss in trading time in the name of investor convenience.

The real reason for these extensions may be to compensate for the revenue loss during the sun outage as the bourses earn on every transaction that takes. This is a sheer waste of time. Unless the trading is interrupted in the last one hour of trading, there is no need to extend trading hours. I would go to the extent of even pleading that on the days of the sun outage let the markets open only after the sun outage period is over.

Don't poach on Saturdays: On Saturday April 17, brokerages across the country were open from 11 a.m to 2 p.m. to in a live special session to enable NSE to test its back-up site at Chennai. While it's all right to carry out mock testing on Saturdays, if the testing has to be live, let it be on a regular day, say for instance Friday.

Let the live testing session be for three hours so that any extension may be done in case of any interruptions. Since the site was already tested on March 23 and November 15 of last year, this testing could have been on a regular day.

In the US, the bourses take their 11 Federal Holidays and Saturday and Sunday holidays very seriously. If one of these federal holidays falls on a Saturday, then they have an additional Friday off and if the holiday falls on a Sunday then they have an additional Monday as a holiday. The US's Independance day of July 4 fell on a Sunday this year, so the markets observed an additional holiday on Monday, July 5. This year's Christmas falls on a Saturday, so the markets would observe an additional holiday on Friday, December 24. Since January 1, 2005 also falls on a Saturday the markets would observe 2005's new year holiday on December 31, Friday this year.

9 a.m may be too harsh: Come July and the markets would open at 9 a.m. instead of the 9.55 a.m., if the regulators have their way and close an hour early at 2.30 p.m. giving the back-office and the banks an extra working hour to process transfer of shares.

At the moment the banks do no appear to be in a position to handle the stringent requirements of the T+1 regime, but even if it does happen as scheduled, the regulators may do well to consider the usual 9.55 start.

Those who commute from distant Virar in Mumbai or Gurgaon near Delhi to their brokerages may have to change the industry. As far as investors are concerned there is no inconvenience if the timings would be from 9.55 a.m. to 2.30 p.m.

The stock exchanges and brokerages exist for the convenience of the investors, who are the real consumers of these services and not for themselves. I am confident that if there is an survey to find out investor preferences, the majority would vote for reduced and convenient market timings. Reduced trading hours may result into marginal lower volumes initially, but I am confident they would rise later.

Apart from investor convenience, back-office hygiene will be better, contracts would reach early, there would be more time to research, power would be saved, employee moral would be high and more importantly the broking machine would continue to generate higher revenues for the exchequer.

First signals that things might be changing for the better came last Wednesday when trading time was not extended despite an early morning snafu that kept the derivative terminals closed for well over an hour.

(The author is Head of Research, Anagram Securities Ltd. The views expressed here are his own and not necessarily those of his organisation.)

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