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India’s equity broking community is divided on the issue of extension of market trading hours forcing the exchanges to go slow on their plans. While a section of large brokers that have fully automated systems for trading and compliance have no reservations against extension of trading time for equity derivatives, the opposition to this move is mainly from small brokers since they fear sharp escalation in cost of operations for the simple reason of having to hire staff for multiple shifts. But it is believed that stock exchanges will eventually extend trading hours with the strategy of each segment at a time.
Interest rate F&O - Precursor?
To steer clear of any controversy, the National Stock Exchange (NSE) recently extended trading time for the interest derivative segment from 9 a.m. up to 5 p.m. effective February 23, compared to the earlier practice of playing the market up to 3.30 p.m. This faced little opposition from the brokers since interest rate derivatives are thinly traded in India.
But the larger plan of the equity exchanges is to align the timing of equity market trading with commodity futures markets on the Multi Commodity Exchange (MCX) that trades for nearly 15 hours.
‘Fear of excessive trade’
Opponents to extension of trading hours in equity markets are also taking refuge in the recent study of market regulator SEBI that retail traders were indulging in excessive derivatives speculation. On this particular point, the view among the equity exchange officials is that the same brokers have no objection when MCX allows trading in commodity trading up to midnight where, too, a large number of retail traders participate.
In May 2018, SEBI had allowed stock exchanges to trade equity derivatives from 9 a.m. to 11.55 p.m. to align it with the timing of commodity derivatives, which trades up to midnight. The move, however, was not implemented then by NSE due to stiff resistance from the broking community. But now the scenario has changed since discount brokers — who offer mobile trade execution — dominate the market share, experts say.
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