Extension of trading hours unlikely to take off anytime soon

MOVE WAS AIMED AT ENABLING EXCHANGES TO OFFER EQUITY DERIVATIVES FOR NEARLY 14 HOURS A DAY

MUMBAI : The extension of trading hours might not become a reality anytime soon as the Securities and Exchange Board of India (Sebi), stock exchanges and brokers were yet to agree on how it would be implemented, said three officials with direct knowledge of the matter.

Markets regulator Sebi had on 4 May permitted exchanges to extend their trading hours beyond the current 3.30pm. The move was aimed at enabling the exchanges to offer equity derivatives for nearly 14 hours a day until 11.55pm. The exchanges were primed to run for the extended hours from 1 October, but this has yet to be implemented.

“We had enabled the exchanges to trade for extended hours and they were to submit proposals, including risk management framework and member consensus. There are some issues there,” Sebi chairman Ajay Tyagi said after the board meeting of the markets regulator on 12 December.

“There is not much movement on that front (extended market hours) from any side. More than the increase in volumes, it will lead to an increase in cost and operational problems,” said Prakarsh Gagdani, chief executive officer, 5Paisa Capital, a low-cost brokerage unit of IIFL Holdings.

“Earlier, there were questions on how the settlement will happen and how the extended hours will be implemented. The answers were not then there and even today they are not. It was kind of a premature decision.”

The three officials cited earlier said the main issues preventing Securities and Exchange Board of India from approving the proposals were a lack of consensus among the exchanges on the duration of extended trading hours, a lack of agreement among brokers, the use of offshore resources by foreign trading members and the absence of an adequate risk management framework.

“The brokers are just not willing to come to a consensus on how long the markets should stay open. Some brokers said that the move does not make sense economically as the estimated volumes beyond 3:30pm will not justify the cost incurred on additional resources. Earlier these concerns were being raised by small brokerages. Now even the big brokerage firms hold a similar opinion,” said one of the officials cited above, requesting anonymity.

The foreign brokerages are also in discussion with the exchanges and teh markets regulator to allow them to use their offshore resources.