According to recent rumors, the National Stock Exchange (NSE) intends to introduce longer trading hours for equity derivatives.
The proposed proposal calls for the addition of an evening trading session from 6 to 9 pm, allowing market participants to trade futures and options contracts outside of the typical 9:15 am to 3:30 pm trading hours. An anonymous source quoted in the paper has led to suspicion that the NSE may extend this session until 11:30 pm.
The main reason for these longer trading hours is to give Indian dealers a chance to react quickly to international happenings. Longer trading sessions are expected to increase trading volumes on the exchange, assuaging concerns that important dealers, such as proprietary desks and hedge funds, will go to rivals like GIFT City, where trading is available 24/7.
While discussing the probable reluctance to expand trading hours for cash equities, Sriram Krishnan, Chief Business Development Officer at NSE, found a general consensus about equity derivatives.
The Securities and Exchange Board of India (SEBI), the market regulator, has already received the NSE’s request, which is pending clearance. Interestingly, SEBI has developed regulations permitting exchanges to keep shares trading open until 5 p.m. and futures and options (F&O) trading open until 11:55 p.m.
What will the first session provide?
Index options and futures will be the only products available for the first evening session, which runs from 6 pm to 9 pm. Future sessions may also feature single stock options and futures. With the extended trading hours, the NSE intends to gradually roll out new products, starting with index futures and options like Nifty and Bank Nifty before adding equity derivatives. For all products, the expiration dates and times will remain the same.
Krishnan also mentioned the potential for extending the timeframe from 9 pm to 11.55 pm in the future or for adding additional products to the session from 6 to 9 pm. However other market participants, including well-known brokers, have raised doubt about the NSE’s choice to prolong trading hours. They contend that extending trading hours may not necessarily increase trade volumes and may actually increase costs and employee unhappiness.