Securities and Exchange Board of India’s (SEBI) move to allow the stock exchange to set their trading hours, in cash and derivatives segment has left many market participants in a state of nervousness, with some brokers feeling that it will only lead to higher cost.
With the move to extend trading hours, India may be at a disadvantage as it will lead to more consumption of manpower as well as energy and hence increase costs, said one broker. This decision to extend trading hours will not increase profits for brokers, he added.
Last week, the market regulator allowed exchanges to set their trading hours between 9 am and 5 pm with a condition that the exchange should have a risk management system and infrastructure commensurate to the trading hours in place.
“Frankly I don’t see any constraint in not being able to do anything which one wants to do within these trading hours. For brokerages the profits will go up because of the extended hours but from the institutional side, trading going up is difficult because they have an x amount of trades to be done which can be done in the current trading hours,” said Sandip Sabharwal, chief executive, portfolio management services, Prabhudas Lilladher Pvt Ltd.
According to other broker, the decision to extend trading hours was taken to help National Stock Exchange (NSE) garner more volumes compared with the Singapore Stock Exchange (SGX), where NSE’s main index Nifty is traded.
SGX has extended trading hours that starts as early as 6.30am and goes till 6 pm.
According to the SGX data, Nifty futures generated 20% volume on the exchange out 62 million contracts of all major Asian indices traded on it last year. SGX has been taking away a major portion of NSE volumes, which may be cause of worry for the Indian bourse.
Raamdeo Agrawal, co-founder and director, Motilal Oswal Financial Service Ltd, said, “ Since SGX Nifty is taking away a lot of share of Nifty trade from NSE, the extended trading hours will help Indian traders and investors to trade in domestic markets rather than on Singapore markets.”
However there are many reasons for which many overseas investors, including institutional investors, prefer to trade on SGX Nifty. The main being costlier securities transaction tax (STT) and stamp duties charged in India. In Singapore, the transaction costs are only two to three basis points of the trade.
One broker, who does not wanted to be identified categorically said the pace at which the Nifty futures’ volume on SGX are growing may come down but the extended hours would not curb trading of Nifty on SGX unless NSE call off its agreement with SGX to trade Nifty there.
Well, what we can do is just wait and watch whether this step by the SEBI will give us an edge over other Asian and well as European markets. - Lorain Viegas [email protected]