Trading Hours – Who really benefits from longer trading hours…

The topic of longer trading hours first came up a few months back when the MSEI had mooted the idea. However, with the limited clout of MSEI it did not make any headway with both the BSE and NSE ignoring the idea. However, this time the suggestion has come from SEBI and the exchanges may look at it more keenly. The idea is to extend the trading hours by another 2 hours till 5.30 pm to avoid the cannibalization of domestic exchange volumes to other exchanges like Singapore and Dubai…

We are globally at par… 

Indian stock exchanges are currently operating for 6¼ hours, which puts at par with most of the leading exchanges. Only France, Singapore and the US trade for longer hours and that is more because these 3 centers happen to be major hubs for the flow of global capital. Back in 2010, the Indian exchanges extended the start of trading from 10 am to 9 am, but that has hardly made any significant impact on volumes. Like in the past, the trading volumes continue to be concentrated in the first 1 hour and the last 1 hour. The 4 hours in between normally tend to see tepid volumes in the absence of any specific triggers. Longer trading hours will create a huge pressure on the brokers, traders as well as the back-office and compliance infrastructure of Indian brokers. The point is that incremental volumes may not really justify this effort. That is the crux of the matter!

What about institutional trades? 

That could be the big challenge. Currently, a large chunk of the equity trades tend to get routed into India through Singapore. Similarly, most of the F&O trades tend to get routed into India through Hong Kong. Both these countries are situated in a time zone that is 2½ hours ahead of India. If trading gets over at 5.30 pm then trade confirmations and custodial approvals should be completed by 6.30 pm which will correspond with 9 pm in HK and Singapore. Then, the FIIs will have to take stock of their currency hedging. Actually, it would make the entire task of trading in India quit impractical.

Volumes are not about hours…

It would be naïve to believe that Indian bourses are losing volumes due to shorter trading hours. Firstly, Dubai Stock Exchange is taking away a chunk of the P-Note trades after the SEBI came down heavily on P-Notes. Secondly, the SGX Nifty has always attracted volumes as it is dollar denominated index and gives a natural currency hedge to FIIs. Last, but not the least, other exchanges like SGX and Dubai do not impose a steep statutory cost like the STT on market trades. That tends to change the economics of trading on these exchanges. Longer trading hours may not be the answer. The real answer could lie in addressing these exchange-level issues! ©

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