The Association of National Exchanges Members of India (ANMI), a body comprising trading members from leading exchanges, has given its in-principle approval to extend trading hours for index derivatives, with the caveat that operational hurdles needed to be sorted out before the move could become a reality.

Last week, the matter was taken up for discussion and approved by its board. This followed a request made by the Brokers’ Industry Standards Forum (ISF) to all broker associations for their input.

Other broker associations, such as the Bombay Stock Exchange Brokers’ Forum (BBF), along with market infrastructure institutions, are also expected to give their inputs shortly, after which the matter will be discussed by the ISF.

“A lot of operational hurdles, especially with regard to settlement and margining, need to be ironed out. This will be discussed at length by the ISF, which will send the final recommendations to the regulator. The final call on any extension will be taken by SEBI,” said an industry official.

A text message sent to a BBF official did not elicit a response.

The SEBI chief had recently said that there were divergent views among the broking community on the matter, while highlighting the need for downtime and maintenance between trading hours.

Catch-22 situation

The regulator now faces a catch-22 situation. Extended trading hours would allow traders to react to market moves in the US, bring in more NRI clients, and boost volumes. On the flip side, extended trading could fuel speculative activity. SEBI’s own study showed that nine out of 10 individual traders in the equity F&O segment incurred net losses. On average, loss makers registered a net trading loss of close to ₹50,000 in FY22.

“The regulator would not want to be seen as encouraging speculative activity,” said a broker.

Brokers will have to deploy more manpower and bear higher overhead costs. Extended trading could, however, provide greater impetus to digital trading, said experts.

The proposal to extend trading hours by three hours for index derivatives was mooted by the National Stock Exchange, which enjoys a monopoly in the segment and may stand to benefit the most from the move.