NSE Mulls Extended F&O Trading Hours
The National Stock Exchange (NSE), India's largest stock exchange, is in the final stages of planning to extend trading hours for equity derivatives, according to sources familiar with the matter.
The proposed extension includes the introduction of an evening trading session, potentially spanning from 6 pm to 9 pm. During this extended period, market participants would be able to continue trading futures and options contracts after the regular trading session, which currently runs from 9:15 am to 3:30 pm. It's also under consideration to extend this evening session to 11:30 pm in the future.
This move to introduce longer trading hours aims to provide local traders with the opportunity to react to global events more promptly, as Indian exchanges currently close before US markets open.
In addition to addressing timing disparities, extended trading hours could potentially increase trading volumes on the exchange. There have been concerns that some major, sophisticated traders, such as proprietary trading desks and hedge funds, might shift their activities to competitors like GIFT City, where trading operates round the clock.
The NSE has already submitted its plan to the Securities and Exchange Board of India (Sebi) for approval, and Sebi has established rules permitting futures and options (F&O) trading until 11:55 pm and stock trading until 5 pm.
The NSE has engaged in discussions with top brokers and other market participants in recent months to gather feedback on the proposed evening session timings. This topic was also deliberated in one of the NSE's Trading Members Advisory Committee meetings.
While an NSE spokesperson declined to provide comments, Sebi did not respond to queries.
To implement the extended trading hours, the NSE is considering a phased introduction of products. It plans to start with index futures and options, including Nifty and Bank Nifty contracts, before potentially including stock derivatives. Importantly, the expiry days and timings for all products will remain unchanged.
Regarding settlement, the NSE intends to treat the evening session as a distinct trading session but proposes to settle trades conducted during the evening along with the regular session's transactions on the following day.
It's worth noting that while there is some resistance from certain market participants, including some prominent brokers, against the proposal for longer trading hours, the resistance is not as formidable as it once was. This is partly due to the fact that the market is now dominated by online brokers with automated trading systems. Some objectors argue that extended trading hours may not significantly boost trading volumes or turnover and could potentially lead to increased costs and employee discontent.
