Domestic stock exchanges have stepped up their efforts to extend trading hours for equity derivative contracts.
"The National Stock Exchange (NSE) is in preliminary discussions with market participants to extend timings for stock futures and options (F&O) trading," said a report by the Economic Times (ET), citing sources.
At present, trading in equity and equity derivative segments is allowed between 9:15 am and 3:30 pm.
As per the ET report, the Securities and Exchange Board of India (Sebi) has already drawn up a framework that allows bourses to keep F&O trading open until 11:55 pm and shares until 5 pm.
One of the proposals is to keep the F&O segment open at least until the US markets open to help traders cut overnight risks, while another suggestion is for trade timings till 5 or 5:30 pm to start with, the report said.
Markets which have longer trading hours tend to be better able to hedge the risk arising due to global information flow.
Besides, SGX Nifty which is a derivative of the Nifty index traded in the Singapore stock exchange starts trading in Singapore earlier. The early opening of SGX Nifty snatches away a lot of business from India as foreign institutional investors (FIIs) tend to invest in Indian future contracts through SGX Nifty.
Longer trading hours will help traders manage overnight market risk more effectively which will attract more market participants including mutual funds and FIIs.
Nithin Kamath, Founder & CEO of the broking firm Zerodha, wrote on Twitter that while extended trading hours will level the playing field for domestic traders against international traders, it will have an effect on life outside trading.
He tweeted, "Extended trading hours for F&O will maybe signal the maturity of our markets. They also level the playing field for domestic traders against international traders and are also good for capital markets businesses in terms of revenues, but I'm conflicted."
"I'm unsure how it will affect the mental health of active retail F&O traders in the long term. Tracking P&L for long hours is stressful & can affect life outside trading."
Kamath also highlighted active traders don't make money, primarily due to overtrading, which could be accentuated by longer trading hours.
"While it could boost revenues for the capital markets business in the short term, I'm unsure if retail investors will end up doing better. This could then potentially lead to lower participation and liquidity in the longer run, which will affect everyone," Kamath wrote on Twitter.
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