NSE Trading: Why SEBI Rejected The Proposal Of Extending Market Hours In Derivatives Segment?

The market watchdog SEBI has most likely rejected the proposal of the leading stock exchange's NSE on extending market hours for the derivatives segment. The reason behind the decision is the lack of enthusiasm by the broker community on the move. In short, NSE's market extension proposal has received mixed support.

After the post-earnings call on May 6th, NSE's chief executive Ashishkumar Chauhan informed reporters that the extension of market hours proposal for derivatives has been rejected by Sebi.

He said that at present there is no plan to increase the trading timings as Sebi turned down the proposal. Chauhan revealed that Sebi did not get the required feedback from stock brokers on the proposal.

Furthermore, Chauhan also said that not all stock brokers have been inclined to support this, on the backdrop of additional costs and technological requirements.

In September last year, NSE filed a plea at Sebi for allowing to extend trading hours for more than three hours in the derivatives segment, preferably during the evening. It has proposed the timing between 6 pm to 9 pm. Further, NSE planned to increase this market hours to 11.30 pm, after a break from the closing of the regular session.

Earlier this year, in February, the Association of National Exchange Members of India (ANMI) had given its approval to the proposal.

There are a host of advantages to trading beyond 3.30 pm in a commodity market. As per a blog dated March 2022, ICICI Direct explained that extended trading hours in currency and commodity derivatives are a boon for traders to take advantage of the market movements and also capture trends of the global markets.

Some of the key advantages highlighted by the brokerage of extending market hours beyond 3.30 pm are:

Additional trading window of ninety minutes in currency derivatives as one can trade in currency segment after 3:30 PM till 5 PM. Whereas in the commodity segment, one gets an additional trading window of approx.. eight hours after 3:30 PM.

Since all three segments, i.e.Equity, Currency and Commodity are regulated by SEBI, you are allowed to trade in all these three segments with a single Unique Client Code and same bank account.

Unutilized amounts from the equity segment could be used for trading currency and commodity derivatives. With just one click, the amount could be transferred to currency and commodity segments.

Since currency and commodity derivatives are low-margin, high-leverage products, it facilitates investors and traders to hold their positions by paying smaller amounts as margin and premium in Futures and Options respectively.

Availability of different variants of contracts in commodity derivatives provides an opportunity to different participants, like retail traders, manufacturing units, corporates, etc. One can take a position in gold by just paying Rs 500 as a margin per lot in 1 gm of GOLD Futures.