NSE Awaits SEBI Approval for Extended F&O Trading Hours

The National Stock Exchange (NSE) is considering a significant shift in its trading hours, potentially introducing extended sessions for equity derivatives. This move aims to provide Indian traders with the ability to react more quickly to global events, among other objectives.

Extended Evening Trading Session

The NSE is contemplating an evening trading session from 6 pm to 9 pm. This would come after the regular trading hours, which currently span from 9:15 am to 3:30 pm. There's even speculation that the NSE might further extend the evening session until 11:30 pm just like MCX based on an anonymous source cited in the report. It's important to note that the settlement of the second session is expected to be done on the next day. This arrangement is likely due to operational constraints related to the working hours of other market intermediaries.

Motivation Behind Longer Hours

The primary motivation for these extended trading hours lies in concerns over large traders, including proprietary desks and hedge funds, shifting their activities to rivals like GIFT City, where trading operates round the clock. The NSE aims to retain its market share and competitiveness by providing traders with the opportunity to trade beyond conventional hours.

Another advantage of having a second trading window, particularly during the US session, is that it enables traders to better manage their positions in relation to global markets. This is the main reason MCX, operates for approximately 15 hours a day, aligning traders with global market dynamics, especially in the international commodity trading arena. Such synchronization minimizes the likelihood of significant price gaps between sessions.

The NSE has submitted its proposal to SEBI, the market regulator, and is currently awaiting approval. It's worth noting that SEBI has already established rules permitting exchanges to keep futures and options (F&O) trading open until 11:55 pm and shares trading until 5 pm. These existing rules provide a framework for the NSE's proposed extended trading hours.

To manage this transition, the NSE plans to introduce products gradually during the extended trading hours. Initially, they will focus on index futures and options, including popular indices like Nifty and Bank Nifty. Later, the exchange intends to incorporate stock derivatives into the extended trading hours. Importantly, the expiry days and timings for all products will remain unchanged.

Mixed Reactions from Market Participants

While the NSE's move towards extended trading hours has its supporters, not all market participants are on board. Leading brokers argue that longer trading hours may not necessarily lead to increased trading volumes. Instead, they express concerns about potential cost escalation and employee discontent.

Conclusion

In conclusion, the NSE is actively exploring the implementation of extended trading hours for equity derivatives, potentially extending trading until 9 pm, or even as late as 11:30 pm. This strategic move is driven by the desire to provide traders with quicker reactions to global events and to maintain its competitive edge amid concerns about traders exploring alternatives like GIFT City. However, it's clear that this proposal has generated a range of opinions within the market, with varying perspectives on its potential impact on trading volumes and operational considerations.