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NSE plans to extend F&O trading hours

NSE to launch derivatives on Nifty Next 50 index from April 24

In late July, a word was spread by exchange, considering a gradual extension of session timings, from currently 9:15 a.m. to 3:30 p.m. or longer. Now again, the NSE has become the talk of the town as its plans have surfaced to extend its trading window for F&O traders.

The Exchange has already submitted its proposal to the market regulator, i.e., the Securities and Exchange Board of India (SEBI), for approval to extend market hours. Rather than extending the ongoing trading window, it is reportedly going to have a separate trading session on the same day. The exchange is planning a session from 6 p.m. to 9 p.m. after a break from the closure of the regular session from 9.15 a.m. to 3.30 p.m. The thing to note is that, according to Sriram Krishnan, Head of Business Development at NSE, the settlement of the second session (6:00 p.m.–9 p.m.) will likely be done the next day. The exchange will gradually implement the changes and begin phase 1 with index futures and options only, including Nifty and Bank Nifty, followed by single stock options and others.

The green light for the idea of extending the trading hour was given by the market regulator in its May 2018 landmark decision. The regulator announced that stock exchanges will now be able to trade in the Equity Derivatives Segment between 9 a.m. and 11:55 p.m. This is similar to the trading hours for the commodity derivatives segment. Based on the response, a gradual extension of the market timing until 11.55 p.m. would be considered.

Extended trading hours would assist in increasing capital formation by enabling more people to participate and attract foreign investors to invest and hedge their portfolios with equity F&O, increase trading volume, but increase costs for small brokers and lead to fatigue among employees.

According to market insiders, there is no good reason behind the NSE proposal to extend trading hours. The proposal will surely increase trading volume but will also increase small traders' expenses. According to some insiders, the exchange might be concerned over big traders shifting to Gift Nifty, which starts its trading session at 6.30 a.m. IST. On the Gift City exchange, trading happens for about 21 hours between two sessions. The first session has begun from 6.30 a.m. to 3.40 p.m., followed by the second session from 4.35 p.m. to 2.45 a.m. the following morning. The timing of trading overlaps with trading hours in Asia, Europe, and the US, and longer trading hours accompanied by two major markets are expected to improve exchange trading volumes.

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