SEBI Rejects NSE’s Proposal to Extend Trading Hours Amid Lack of Broker Consensus

Big news came out of the Indian financial markets when the Securities and Exchange Board of India (SEBI) said no to the National Stock Exchange (NSE) extending the trading hours for its equity derivatives segment. This announcement was made by Ashish Kumar Chauhan, Managing Director and CEO of the NSE, on an analyst call. The proposal, if approved, would have marked a pivotal shift in the operational framework of the Indian stock market, aligning it more closely with global markets.

Background of the Proposal

The proposal to extend trading hours was initially reported by the news agency PTI in September of the previous year. It was part of NSE’s strategy to expand the operational hours of the equity derivatives market in a phased manner. According to NSE’s plan, the first phase would involve extending trading hours to 9 PM following the regular session which runs from 9:15 AM to 3:30 PM. The second phase was to push the closing time to 11:30 PM for index derivatives, and in the third phase, the trading hours for the cash market would extend until 5 PM.

Reasons for the Proposal

The primary motivation behind this proposal was to provide Indian investors, especially the smaller ones who currently lack access to global markets, the opportunity to react to international events and news during off-hours. Such an extension would theoretically allow for more synchronous trading with European markets, which open when Indian markets currently close, and provide a longer overlap with American markets.

SEBI’s Decision

Despite the strategic intentions behind the proposal, SEBI decided against extending the trading hours due to a lack of consensus among the broker community. Chauhan noted that the necessary feedback from stock brokers, which SEBI had sought, was not adequately provided, leading to the regulator shelving the proposal for the time being. Earlier in February, it was reported that the Association of National Exchange Members of India (ANMI) had initially given in-principle approval to the proposal, indicating some level of support within the broker community. However, this was not sufficient to sway the regulator’s final decision.

Market Impact and Reactions

The rejection of this proposal maintains the status quo in trading hours but also reflects the complexities involved in altering market structures, which require broad agreement and clear benefits to all stakeholders. Broker concerns likely revolve around the operational, regulatory, and financial impacts of extended hours, which may include increased costs, staffing issues, and the need for extended surveillance and compliance frameworks.

Financial Performance of NSE

In other news related to NSE, the exchange has recently reported a significant growth in its financial performance. Its net profit surged by 55% from the previous year, while its operating revenue increased by 34% to Rs 4,625 crore. Additionally, the NSE announced a generous shareholder remuneration plan, issuing four bonus shares for everyone held and declaring a dividend of Rs 90 per share.

Conclusion

While the idea of extending trading hours in India’s stock markets to better align with global markets is appealing for various reasons, the regulatory approval required to implement such changes depends heavily on the consensus among all market participants. For now, Indian markets will continue to operate within their traditional hours, awaiting perhaps future proposals that address the concerns raised by brokers and other stakeholders more effectively.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.