Mumbai : In a major development for the equity derivatives market, the Securities and Exchange Board of India (Sebi) on Friday allowed exchanges to extend trade in futures and options until 11.55 pm to align with the commodity derivatives market.
The new regime will be effective from October 1, the day fixed by the regulator to integrate commodity and stock exchanges into one entity.
The exchanges that want to extend trade timings, however, must seek prior approval from the regulator, “…along with detail proposal with respect to risk management, settlement process, monitoring of positions, availability of manpower, system capability, surveillance systems, etc,” Sebi said in a circular on Friday.
Ashishkumar Chauhan, managing director and chief executive officer of BSE, which is planning to enter the commodity derivatives segment on October 1, welcomed the decision saying the Indian market will now be at par with the global financial and commodities market.
While it is too early to assess the pros and cons of the extended trading hours, analysts gave a cautious thumbs up and added that initially the extended trading hours may be limited to futures and options of the Nifty 50 index.
The extended trading in Nifty 50 derivatives will bring the Indian market on an equal footing with the likes of the Singapore Stock Exchange, which was attracting global participation across various time zones due to the 12-hour trade facilitation.
More importantly, traders said though extended trading hours will allow hedgers to react to global events on a real-time basis, it will create problems in financial settlement of trades in the absence of commensurate banking hours in the country.
“It (extension of trade hours) will pose challenges to brokerages in terms of increase in establishment costs and other overheads, but it will also increase the breadth and depth in the market,” said Nirmal Jain, founder and chairman of IIFL Group, a financial services company.