SEBI Plans increasing D-Street trading Hours

[B. Karthick]

Longer trading hours may become the norm for stock market
intermediaries sooner than later. The capital markets regulator, Sebi,
is learnt to be thinking of increasing stock exchange trading hours
so that market participants in India are better placed to react to
developments in global markets. If the proposal is approved, the
equity market will be open for trading from 9:00 am to 5:00 pm.

At present, the cash & derivatives segments are open from 9:55 am to
3:30 pm, currency derivatives market operates from 9:00 am to 5:00 pm,
while the commodity futures market operates from 10:00 am till 11:30
pm. The proposal, based on the feedback received on a discussion paper
floated by Sebi for longer trading hours in equity, is likely to be
taken up with the Secondary Market Advisory Committee (SMAC),
according to a person close to the development who requested
anonymity.

The SMAC, which consists of representatives from Sebi, investor
groups, stock exchanges and other market participants, will debate the
proposal, and send it to the Sebi board, which will take the final
decision. “The SMAC will take into account the views of all categories
of market participants. The regulator is keen not to penalise anybody
in terms of time or infrastructure constraints. As such, the extension
of trading hours will be done in a phased manner. A final decision
could be taken reasonably soon, possibly in a month,” said a person
familiar with the issue.

Trading on major Asia Pacific bourses — Japan, Hong Kong and Shanghai
— commences a little ahead of the Indian markets, while the European
and American markets open much later. Sebi had, in March this year,
proposed an extension of trading hours of stock exchanges to align the
domestic bourses with international markets. “In a world where
different exchanges are competing with each other to increase
participation, it is imperative that the Indian markets align
themselves to global markets to attract such trading interest.

Extension of market hours would enable market participants to execute
trading strategies in Indian markets based on information flowing in,
which otherwise would have been executed outside India,” Sebi had said
in its discussion paper floated for public comments.

The proposal had created a furore among market participants, with a
large section objecting to an extension in trading hours. However,
people familiar with the issue believe that it is only a matter of
time before the new norm is accepted.

“The regulatory infrastructure in commodity markets is different from
the equity markets. There is no real-time client-level margining there
unlike in equity markets. A client should have the ability to move
margins. For that, it is imperative that both broking as well as
banking infrastructure are in tandem. Or else, the only beneficiaries
would be speculators,” said an industry official.

For their part, bankers feel that some changes will be needed to
ensure seamless transfer of money. Real time gross settlement (RTGS) —
which allows quick transfer of funds — timings will have to be
extended, and banks will have to ensure alignment with other
treasuries. “But these are issues that can be worked out,” said a
banker with a clearing and settlement bank.

The regulator has, however, made it clear that issues with market wide
implications such as risk & collateral management, infrastructural
constraints as well as the perception of the market participants and
stakeholders will play an important role in determining optimum market
timing. Sebi said in its discussion paper it recognises that extension
of trading hours may also put pressure on infrastructure for the
exchanges as well as market intermediaries. Moreover, in order to
obligate the margin/collateral requirement of investors, banks/
financial institutions may also need to keep their offices open for
the extended duration.