Sebi extends market trading hours; here's what experts say

We still need to see if the extended timings will be for all securities or securities in equity derivatives market will trade till the time underlying equities trade and only indices will be allowed to trade for extended hours.

The extended timing is similar to the trading hours for commodity derivatives segment. Image source: PTI

Markets regulator Sebi allowed exchanges to extend the trading time in equity derivatives contracts by more than eight hours till almost midnight from October 1. Currently, trading is allowed from 9.15 am till 3.30 pm. The move comes in the backdrop of market regulator's efforts to enable integration of stocks and commodities trading on a single exchange.

"It has been decided to permit stock exchanges to set their trading hours in the equity derivatives segment between 9:00 am and 11:55 pm," Sebi said in a circular.

The extended timing is similar to the trading hours for commodity derivatives segment which are presently fixed between 10 am and 11:55 pm, the circular added.

Ajay Menon, CEO, Broking & Distribution, Motilal Oswal Securities believes extended trading hours could be useful to provide an opportunity to hedge the market risk beyond the regular trading of existing cashmarket hours between 09:15 to 093:30 pm.

"The latest decision of Sebi and implementation of the same by stock exchanges may bring Indian market in line with International market but volume may get scattered at different time slots compared to the trading pattern at the current scenario which may cause comparatively lesser trading depth for certain stock futures becauase of scattered time of the trading hours," Menon said.

For a broker, howver, it will result in extra cost as they will have to revise their policy for risk management, execution, survilience and feasibility of additional resources for longer trading hours but at the same time it would be helpful to get more business if it really attracts more trading turnover.

Menon also suggested that as per current context if it is applicable for Indian Equity derivatives market, then it should first include the framework of settlement process, system capability, availability of man power, survilience, and risk management system.

"There is no clarity on what type of derivatives will be traded in the extended hours and if derivative trades for longer time then exhanges need to understand what will be the effect of tradional cash market gap up or gap down opening," he said.

Meanwhile, Ashish Rathi, Head of Compliance and Whole-time Director, HDFC securities believes the extended timing for equity derivatives is an enabling provision by Sebi for exchange timings to be between 9 am to 11.55 pm.

"In our perspective, this move will align with commodities market timings. However, we will have to wait for exchanges to implement the same with prior approval of Sebi," he said.

We still need to see if the extended timings will be for all securities or securities in equity derivatives market will trade till the time underlying equities trade and only indices will be allowed to trade for extended hours, he added.

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