Sucheta Dalal :Trading hours extended what about settlement?
Sucheta Dalal

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Trading hours extended, what about settlement?  

January 4, 2010

Both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) on Monday started trading at 9am, about an hour earlier than previous days. This move is expected to increase trading volumes. However, a majority of brokers are still unhappy over this move.


Speaking about increased volumes in Monday's trade, a broker said that usually volumes peak at the beginning and closing of the trading session. Today, the treasury share sale by Reliance Industries led to an increase in volumes.


"Volumes were low when the Sensex was at 8,000 levels, then why was the move (to extend trading hours) not envisaged at that time?" asked the broker.


Stockbroker associations like the BSE Brokers Forum and the Association of National Exchange Members of India (ANMI) have asked bourses to maintain the status quo in trading hours until adequate infrastructure is in place.


ANMI, which claims the support of 850 members, had approached stock exchanges, regulators and the government to look into the extension of trading hours until adequate banking infrastructure was in place.


"The Association is of the view that it is necessary to maintain status quo on the timing, till adequate infrastructure is in place. There should not be any hurry to extend the market timing," ANMI's president EMC Palaniappan had said.


The Association has urged the Reserve Bank of India (RBI) to improve the banking infrastructure, as most of the banks across the country do not have real time gross settlement (RTGS) facility, which is necessary for high-value transactions, Mr Palaniappan had said.


Reflecting the intense rivalry between the BSE and the NSE, both exchanges, earlier this month, had said that trading would start at 9am from 4th January, nearly one hour before the current opening time, inviting protests from brokers and investors.


Typically, banks open their RTGS platform at 9am and bourses used to open for trading at 9.55am. Brokers were using the crucial time of 55 minutes to settle their margin payments. With the advancement of trading hours, this window is now closed for brokers and its effects would be known only after a few trading sessions.


"I don't think transactions with the banking system would be an issue. I believe retail investors, traders and arbitragers are not quite happy with markets opening early," said Prakash Kacholia, managing director, Emkay Global Financial Services Ltd.


According to a survey, nearly 80% of the trading members of the BSE Brokers Forum were against the extension of trading hours while 62% of the members of ANMI felt that extending trading hours could put additional load on the system.


Reacting on the issue, banker PV Maiya said, “Both exchanges are a bit childish. Why should they assume that the banking system or any other agency should bend to accommodate their whimsical game? Any change must involve due consultation with all the parties and not for display of one-upmanship, this is not their private affair."


In October, market regulator Securities and Exchange Board of India (SEBI) allowed bourses to set their trading hours between 9am and 5pm on condition that appropriate risk management systems and infrastructure are put in place.

Yogesh Sapkale with Ravi Samalad


-- Sucheta Dalal