NSE anticipates increasing the Trading hours

Recent Developments

Starting February 23, 2023, the National Stock Exchange (NSE) has extended the trading hours for interest rate derivatives till 5 p.m.

The trading hours for other interest rate derivative contracts won't alter. According to a statement from the NSE, all existing contracts with an expiration date later than February 23, 2023, as well as all new contracts launched afterward, will be open for trading until 5:00 pm on the day of expiry.

According to a Business Standard article, the NSE has now begun talking with market participants about extending market trading hours in the stock categories.

"SEBI is anticipating for an extension of the equities market timing to a maximum of 9 am to 5 pm. They are now looking forward to extending the derivatives timings from 9 am to 11:55 pm and the decision is not yet taken ahead”, says Ashish Kumar Chauhan, the Managing Director (MD) and the CEO of NSE.

The major topics of conversation between NSE and market players are the length of trading hours, the contracts that should be offered, and problems that the exchanges need to fix. One idea is to keep the F&O section open at least until the US markets open in order to assist traders in lowering overnight risks. Another suggestion is to begin trading at 5 or 5:30 o'clock in the evening.

Although the Asian markets are ahead of the Indian time zone, the European and American markets are extended beyond the Indian market timings. Several exchanges in these nations have extended their trading hours, which go as long as 23 hours. In a discussion paper on the expansion of market hours for trading in exchanges, SEBI claims that this has made it easier for market players in these nations to offset the risk that can arise from global information flow.

Background:

The cash sector trading hours on the NSE, Bombay Stock Exchange (BSE), and NSE Futures and Options (F&O) is currently from 9.15 am to 3.30 pm. The NSE's currency derivatives market is open from 9 am to 5 pm. From 9 am to 11:55 pm, the commodity markets are open for trade.

Earlier, in 2009, the Securities and Exchange Board of India (SEBI), the market regulator, permitted exchanges to expand their trading hours. Moreover, SEBI permitted equities derivatives contracts to trade between 9 am and 11:55 pm in 2018.

The SEBI has already released the necessary foundation for time extensions. The stock exchanges were left in charge of deciding whether to extend trade timings. According to the Economic Times, the modification would therefore not necessitate any changes to SEBI's rules.  The talk of extending business hours has been circulating for some time, not just now.

The active trading takes place on NSE and BSE for 6 hours and 15 minutes, starting at 9:15 am and finishing at 3:30 pm, following a pre-opening session from 9 am to 9:15 am. The NSE is anticipating to extend the closure period by one and a half hours, to 5:00 pm, in the evening.

Pros and Cons:

The expansion of trading hours is expected to reduce the overnight market risk. The decision to extend trading hours will help traders manage overnight market risk in an efficient way. More market participants, such as Mutual Funds and Foreign Institutional Investors (FIIs), are likely to be drawn in this fashion.

More volume would come from an extension of trading hours, but it is unlikely that stock prices would be significantly impacted. The primary benefit of extending trading hours is the decrease in night-time market risk. Extended trading hours will enable traders to better manage night-time market risk, which will draw additional market participants to the market. According to analysts, extending trading hours till 11:55 p.m. will let positional traders adapt themselves to the news flows in the US markets.

By extending domestic exchange transaction timings, domestic market participants may be able to gain from such global information flows, claims SEBI. By extending market hours, it would likely be easier to align Indian markets with the finest international standards and practices. Longer trading hours "may assist in effective assimilation of information and so make Indian markets efficient, thereby benefiting Indian investors," SEBI continues. The fact that SGX Nifty, a derivative of the Nifty index listed on the Singapore Stock Exchange, begins trading in Singapore earlier is another reason in favor of extending trading hours.

Our markets currently overlap (at least temporarily) with those in Europe and Asia-Pacific, but not with those in America. Positional traders will be greatly aided by this in managing their positions in accordance with US markets and lowering overnight market risks, said Yuvraj Thakker, MD, Stoxbox.

Trading risks will be greatly reduced for investors if domestic market trading hours coincide with those of the US and Singapore exchanges, which would eventually lead to a decrease in market volatility. While the decision might be in the favour of the retail traders, by profiting them from the events that occur across the world after markets close, it is bound to add costs, operational delays, and time crunch for the brokerage houses.

Impact:

In today’s global world, the interconnectedness of economies and the level of global market integration are both rising. The Indian stock market is impacted by movements in other key economies and marketplaces like the US and Europe. The uncertainty posed by the global flow of information is often better managed in markets with longer trading hours.

Now, the question is – Will the market hours be extended by NSE for all other segments? And if yes, what will be the closing time for the market? Keep watching the space to have all the latest updates with just one click.

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