NSE is reportedly finalising plans to extend trading hours for futures and options (F&O) segment in a phased manner. It is reported that instead of stretching the ongoing trading hours, there will be a separate trading window from 6 pm to 9 pm, which at a later stage would be increased to 11:30 pm. Marketmen are mixed so far as such a move, if approved by Sebi, would increase operational cost for brokers, even as it would mean increased participation.
They noted that while the extended trade may help domestic traders react to Europe and US markets, they will have less time to analyse the market behaviour or for introspection. Besides, they noted that while extended hours may give traders opportunity to react to data releases on US non farm payrolls, CPI and GDP numbers, there are many other sensitive developments such as US Fed rate decisions, which are announced quite late in the night and are beyond the coverage of proposed extended hours.
Arvinder Singh Nanda, Senior Vice President, Master Capital Services said a second trading window in the evening will help traders manage their positions more efficiently and be in sync with global markets like the US and others. Nanda said it is not something new for the domestic traders, as MCX does operate for around 15 hours a day, to keep traders in sync with commodity prices internationally. This reduces the chances of huge gap ups and downs in the next trading session, he said.
That said, the decision to extend trading hours in a stock market is a complex one, and it depends on various factors. The merits include global accessibility and convenience, increased participation, reduced overnight volatility and more opportunities for traders. Demerits, on the other hand, include operational challenges & cost, additional risk management measures and impact on health and work-life balance, Nanda said.
Pramit Mishra, Principal Associate at law firm MV Kini said Sebi may have to consider the fact whether increase in trading hours will actually result into substantial benefit for the investors without burdening the trading member in term of additional administrative/operational cost.
"Further, extension of trading hours will also mean that the market participants and various stakeholders will have less time to analyse the market behaviour and external development in order to prepare for any trading strategy," Mishra said.
Shrey Jain, founder at discount brokerage platform SAS online said Sebi may most likely go ahead with extended trading hours. Jain said the move may help traders manage positions against price movements in global markets in the evening. Brokers, he said, would be required to gear up for extended trading hours in terms of manpower requirement," he said.
Earlier in a tweet on X (formally Twitter), Samir Arora of Helios Capital on September 25 asked: whether it matters if traders react immediately or the next morning. "For the same pot of money everyone works more," he said.
Instead, Arora said one can increase the number of stocks that have listed futures to bring more efficiency to stock prices.
Similar views were echoed by Anand James of Geojit Financial Services. He said an average F&O trader is less likely to warm up to the idea of the evening session as it eats into one’s personal time and space, which is essential for research and planning and, more importantly, for introspection. He, however, said one cannot underestimate the possibility of the emergence of a different breed of investors.
"While large investors who need depth and tight spreads could wait for the regular session, those looking to react early to global news flow could be interested, despite the risk of potentially lower volumes," he said.
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