SEBI allows extended trading hours

SEBI vide circular SEBI/DNPD/Cir-47/2009 dated October 23, 2009 has permitted the Stock Exchanges to set their trading hours (in the cash and derivatives segments) between 9 AM and 5 PM. It also states that the exchanges should have in place risk management system and infrastructure commensurate to the trading hours. The markets are currently open from 9:55 AM to 3:30 PM.

A brief history

Earlier this year, SEBI had published a discussion paper on the 'Increase in market hours of trading in exchanges'. SEBI observed that 'while the Asian markets are ahead of Indian time zone, the European and American markets extend much beyond the Indian market timings. Some of the exchanges in these countries have adopted longer trading hours, sometimes even extending up to 23 hours. This has facilitated market participants in these countries to hedge their risk that might arise due to global information flow'. Extending the trade timings of the domestic exchanges may, therefore, enable the domestic market participants to take advantage of such global information flows. Additionally, Indian markets have been in the pursuit of matching the best international standards and practices, and the extension of market hours would, perhaps, be a further step in this direction.

Need for increased market hours (based on SEBI discussion paper)

1. With the increased integration of the global markets, information originating from one country / market has a bearing on the markets in other country / market and India is no exception to this phenomenon. It is important to align Indian markets, as far as possible, with those of the international markets to facilitate the assimilation of any economic information that may flow in from other global markets. One such alignment could be in the area of market timing.


2. Quick and effective assimilation of information makes markets more efficient in terms of better price discovery, reduction in volatility and impact cost. The extension of market hours may help in effectively assimilating information and thereby make Indian markets efficient, benefiting Indian investors.


3. In a world where different exchanges are competing with each other to increase participation, it is imperative that the Indian markets align themselves to global markets to attract such trading interest. Extension of market hours would enable market participants to execute trading strategies in Indian markets based on information flowing in, which otherwise would have been executed outside India.


4. The extension in market hours enables participants to take positions over a longer time window. This enables them to take advantage of market movements overseas.
   

Effect on traders

The good news is that intraday traders will have more time to play with the market volatility. But on the other side the bad news for stock brokers is that they will have to stay for more hours before they can go home.

A copy of the circular is available here.