Sensex, Nifty derivatives can be traded till midnight

Traders in India’s derivative market may not have to wait until the next day to hedge their positions in response to events that occur late in the evening when markets in the US open.

Domestic bourses have now been allowed a provision to trade index derivatives till 11.55 pm. Index derivative trading in India is mainly concentrated in Nifty and Bank Nifty, but the Sensex could see some traction due to extension of trading hours, experts said.

At present, equity trading is done for six-and-a-half hours, from 9 am to 3.30 pm, even though it is allowed till 5:30 pm. Further extension requires market regulator SEBI’s permission.

On Friday, SEBI said exchanges can trade index derivatives up to 11.55 pm effective October 1. The move is an enabling provision to bring uniformity between equity and commodity markets that are allowed to trade till midnight. But it is believed that arch rivals BSE and NSE will try to take first-mover advantage. Younger rival Metropolitan Stock Exchange has already been demanding that it be allowed to trade for longer hours to differentiate itself from the older bourses.

“Globally, the derivative exchanges are already following extended trading hours. It (SEBI move) will bring the Indian markets in line with international markets,” said Ashish Chauhan, MD and CEO, BSE.

Experts say the move could also be aimed at containing exchanges in Singapore and Dubai, which are in a race to corner trading volumes linked to Indian markets. Singapore bourse SGX recently said it will launch an India index on its platform after the NSE decided to withdraw from its agreement to trade the Nifty on the overseas platform.

However, Experts say the mere extension of trading time for index derivatives was not enough to counter the Singapore and Dubai markets, where business in India-linked products is thriving. Most traders are attracted to overseas venues due to fewer tax and regulatory hassles.

Domestic stock brokers have been opposed to extension of trading hours for equity markets but most welcomed Friday’s announcement, as it was restricted to index futures. Brokers are of the view that a rise in trading volumes has no direct correlation with extension of trading hours but it could push up costs significantly.

“ANMI (Association of NSE Members of India) welcomes enabling provisions on extension of trading hours but wishes to place on record that it should be restricted to index derivatives alone and not cover individual stocks, as they may be vulnerable to abuse by unscrupulous elements,” said Rajesh Baheti, President, ANMI.

“We feel exchanges will move ahead with implementation of any provision only if its costs commensurate with benefits achieved,” said Uttam Bagri, Chairman, BSE, Brokers Forum.

COMMENT NOW