November 05, 2009

life in financial markets: trading hours on india's stock exchanges

There are no clear answers to the question on whether trading hours on stock exchanges should be long or short, but, I, for one, would like it to be as long as the stock exchange is able to offer it after ensuring that its risk-management system is be able to handle it. In India, for instance, the NSE or BSE can keep its trading system on for few hours in the morning-afternoon and a few hours in the late evening. For settlement purposes, each batch's trades should be cleared and settled separately on T+2.

Anyway, here is something I wrote in the magazine I presently work on the subject:

Missing the woods for the trees
If you open the door, open it fully. That is the message from some market observers on Sebi’s green signal to the stock exchanges to keep their trading system open any time between 9 am to 5 pm and extend their timings before and after the current 9.55 am – 3.30 pm regime.
The NSE had been lobbying hard to start their trading earlier in the morning due to gradual loss of global investors’ trading volume in its Nifty futures contract to Singapore Exchange’s Nifty futures contract that had a 2-hour head start due to the time difference between the two countries.
But domestic brokers and investors, wanting to use European and US markets developments in their trades in India, would be better off if NSE or BSE offers them a late evening trading hours slot.
“Exchanges ought to be free to decide their trading hours,” says Ajay Shah, associate fellow at the National Institute of Public Finance and Policy. “It is wrong for the regulator to control this.” We second that.

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