Market regulator Securities and Exchange Board of India (Sebi) is examining a proposal by National Stock Exchange (NSE) to increase trading hours in the equity derivatives segment.
The NSE is planning a session from 6 pm to 9 pm after a break from the closure of the regular session from 9.15 am to 3.30 pm in a bid to protect traders from the overnight risk arising from global information flow.
In India, the equity and equity derivatives market close at 3.30 pm when most of the European equity markets would have just opened for trading, while the US equity markets would be closed.
Indian investors, particularly the small ones, do not have access to markets in global jurisdictions. Such investors are not able to act when information or events take place outside the regular trading hours, which affect the Indian asset prices, particularly equity indices.
The longer trading hours in the offshore markets provide an opportunity to incorporate such information when onshore markets are closed. This would help in onshore price discovery of Indian assets, and investors will get the opportunity to execute their views along with foreign investors when there is any news having an impact on any sector/industry or overall economy.
According to Reuters, the regulator is yet to take a final call on the proposal. It is examining if such an extension will lead to settlement issues in the segment which usually witnesses high trading volumes.
"For smooth settlements, both the NSE and BSE and their respective clearing corporations need their systems to be prepared to handle extended trading hours," Reuters quoted a source as saying.
Transactions in the evening session will be in effect included in the trading session on the next business day, Sriram Krishnan, chief business development officer of NSE, had earlier told news agency PTI.
To begin with, only index derivatives in phase 1 would be available followed by single stock options and others.
Once the exchange receives clearance from Sebi, preparations will have to be carried out by all stakeholders such as process re-engineering, streamlining of various timelines, etc, before extending trading hours in the Futures & Options (F&O) segment.
NSE carried out consultations with various trading members serving different categories of investors across regions, industry associations, and other stakeholders on the proposal for more than nine months.
—With PTI inputs