SEBI seeks smooth settlement of trades on NSE, BSE if it allows extended F&O trading hours: Report

Market regulator SEBI is examining a proposal from National Stock Exchange to extend trading hours for F&O (futures and options) trading but a final decision has not yet been taken, said a report on Wednesday.

NSE has recently sent a proposal to the Securities and Exchange Board of India (SEBI) to have an evening session to trade in index futures and options to help investors to hedge risks.

SEBI is assessing whether the extended hours will fuel already high derivative trading volumes and if the trade settlements will be smooth, Reuters reported citing a source with direct knowledge of the matter.

"For smooth settlement of trades, both the NSE and BSE (Bombay Stock Exchange) and their respective clearing corporations need their systems to be prepared to handle extended trading hours," this person told Reuters,

If asked by the regulator, the BSE is prepared to facilitate evening trades, an official familiar with the BSE's thinking said.

Sources declined to be named as they are not authorised to speak to the media. 

The NSE has proposed extended trading between 6 p.m. IST to 9 p.m. IST, with evening-session trades to be settled the next day, said Sriram Krishnan, NSE's chief business development officer.

He said that cash equities and single stock options have been kept out of the pilot plan.

The bourse is planning a session from 6 pm to 9 pm after a break from the closure of the regular session from 9.15 am to 3.30 pm, Sriram Krishnan recently told PTI. Further, transactions in the evening session will be in effect included in the trading session on the next business day, he said. Based on the response, a gradual extension of the market timing till 11.55 pm -- on the lines of commodity derivatives -- would be considered, he added.

Market experts said extended trading hours would assist in increasing capital formation by enabling more people from India to participate and attract foreign investors to invest and hedge their portfolios with equity F&O. The proposed measure by the NSE to increase the trading time for the equity derivative segment will help market participants and retail investors. In India, the equity and equity derivatives market close at 3.30 pm when most of the European equity markets would have just opened for trading while the US equity markets would be closed. Indian investors, particularly the small ones, do not have access to markets in global jurisdictions.

Such investors are not able to act when information or events take place outside the regular trading hours, which affect the Indian asset prices, particularly equity indices. The longer trading hours in the offshore markets provide an opportunity to incorporate such information when onshore markets are closed. This would help in onshore price discovery of Indian assets, and investors will get the opportunity to execute their views along with foreign investors when there is any news having an impact on any sector/industry or overall economy. In 2018, the markets regulator allowed stock exchanges to set their trading hours in the equity derivatives segment between 9 am and 11.50 pm. This was similar to the trading hours for the commodity derivatives segment, which are currently fixed between 10 am and 11.55 pm. The move was part of Sebi's efforts to enable the integration of stocks and commodities trading on a single exchange.