SEBI permits extension of trading by 2-1/2 hours a day

24 Oct 2009, ET Bureau

MUMBAI: Indian stock market will soon witness longer hours and higher volumes. In a move that will give investors more flexibility but make life in the dealing room and back-office far more demanding, capital market regulator SEBI has permitted stock exchanges to begin the day as early as 9 AM and keep the market open for trading till 5 PM.

Currently, trading in stocks and equity derivatives take place between 9:55 AM and 3:30 PM. While the exchanges are yet to fix the timings, the decision to align the timings of the stock markets with other financial markets like currency, bonds and call money may boost volumes in stocks and equity derivatives. More interestingly, if the local market opens at 9 AM, it may drive a slice of the trading volume from Singapore, where the Nifty futures are traded, to India. Since operators shorting a stock often use the shallower Singapore market to drag down the scrip in India, an early opening will lower the scope of such manipulations.

A senior NSE official told ET that the exchange is likely to extend the trading hours 'soon'. "The exchange is conducting a review to ensure that systems are compliant with SEBI requirements. We do not anticipate any issues in starting soon," the official said. A BSE spokesperson said the exchange welcomes the SEBI directive on extension of trading hours, though he declined to comment on when it plans to implement it. ET had first reported about SEBI's intention to allow extended trading hours in its edition dated December 12, 2008.

Brokers said institutional investors will benefit from the advancing of trading time in the morning, while day traders will have more time to react to European markets.

Also, retail investors are likely to get more time to track their portfolio and even book trades after finishing their regular work. However, analysts tracking corporate developments may have to wait longer, as most companies make market sensitive after trading hours.

"Given the fact that volumes have been increasing on SGX (Singapore Exchange) where the Nifty is traded, this was anticipated and is a positive move," said Rashesh Shah, CMD, Edelweiss Capital.

The origin of the proposal to extend trading hours has its roots in an increased interest among FIIs and overseas arbitrageurs in Singapore Nifty futures. Nifty futures on the Singapore Exchange are available to global investors at least a couple of hours before trading starts in Indian markets. This has resulted in overseas investors gaining an upper hand over local investors, who do not have access to Singapore Exchange, to react to global events and volumes shifting from NSE's equity derivatives segment to Singapore.

"This step will help Indian investors manage the risk better, as Singapore starts trading in Nifty ahead of NSE," said CJ George, managing director of Geojit BNP Paribas Financial Services.