NSE Seeks SEBI Approval to Extend Trading Hours for F&O Market

26 Sep, 2023

NSE Seeks SEBI Approval to Extend Trading Hours for F&O Market

The National Stock Exchange (NSE) is set to gradually extend trading hours in the equity derivatives segment, a strategic move aimed at mitigating the overnight risk associated with global information flow. Sriram Krishnan, the Chief Business Development Officer of NSE, shared this development on Monday.

As part of this initiative, the NSE plans to introduce an evening trading session from 6 pm to 9 pm, following the regular session that operates from 9.15 am to 3.30 pm. Transactions conducted during the evening session will be incorporated into the trading session of the next business day. Depending on the response, the NSE may consider further extending the market timing until 11.55 pm, a model similar to commodity derivatives trading.

The extension will be rolled out in phases, starting with index derivatives in phase one, followed by single stock options and other instruments.

The NSE has already submitted its proposal to the Securities and Exchange Board of India (SEBI) for approval. Sriram Krishnan expressed optimism, stating, "We are hopeful that we will get quick approval from SEBI on our proposal."

Once SEBI grants approval, all stakeholders will need to undertake preparations, including process re-engineering and streamlining of various timelines, to facilitate the extension of trading hours in the Futures & Options (F&O) segment.

Krishnan emphasized that the primary motivation for this proposal came from the trading community. Over a period of nine months, the exchange engaged in consultations with various trading members across different investor categories, industry associations, and other stakeholders. The proposal was also discussed within the NSE's trading members' advisory committee.

Market experts anticipate that extended trading hours will stimulate capital formation by allowing more Indian participants to engage and attract foreign investors to invest in and hedge their portfolios with equity F&O.

Currently, in India, the equity and equity derivatives market closes at 3.30 pm, just as European equity markets open and US markets remain closed. This time gap puts Indian investors, especially smaller ones, at a disadvantage as they cannot react to events or information outside regular trading hours, affecting Indian asset prices, particularly equity indices.

Extended trading hours will bridge this gap by aligning with offshore markets' timings, enabling onshore price discovery of Indian assets. This change will provide investors with opportunities to act on their views alongside foreign investors in response to news impacting specific sectors, industries, or the overall economy.

In summary, the NSE's proposal to extend trading hours for the equity derivatives segment aims to enhance risk management and boost market participation, offering investors more opportunities to engage with the market and react to global developments.