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Both the MCX and NCDEX have issued clarifications that the restriction till 5 pm on trading timing in commodity futures market will continue till further notice.
Commodity futures market in India was accustomed to trading from 10 am till midnight in India. But, the exchanges moved to curtail the trading hours till 5 pm when the Covid-19 lockdown was announced.
Brokers reasoned that since physical commodity markets were largely shut, there was no scope for hedging and keeping markets working till midnight would serve no purpose. Prominent brokers who run propriety desks or provide algorithm services, however, resisted the move and argued that timing should be kept as usual as the US markets opened for trading after 7 pm.
Even equity market participants had earlier demanded restrictions in trading hours but that was not considered by SEBI as equity markets trade only till 3.30 pm.
Sandeep Jain, Senior Vice-President, BME, told BusinessLine that derivatives trading on the commodity exchanges would not lead to any effective price discovery as long as the physical markets remain shut and extension of timing in the current situation would be an unnecessary burden. In India, there is delivery-based settlement in the commodity markets but delivery cannot take place since physical markets are shut.
On March 26, following an order from SEBI, commodity exchanges cut down the commodity derivatives market trading hours to 5 pm, against the earlier practice of midnight. This was after the Commodity Participants Association of India (CPAI) urged SEBI and the government to cut short trading hours as brokerages were facing trouble in keeping their operations running smoothly.
However, CPAI in April came under pressure from the broking community and requested SEBI to revert to the practice of trading till midnight. For a few days, brokers witnessed falling trading volumes. Also, trading volumes mainly pick up when the US markets open for trading. The cue for crude oil futures comes from the US.
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