Should Indian equity markets extend trading hours?

September 15, 2017

The talks have started again. In 2007 or so at the peak of the global financial cycle there were suggestions to extend market hours as one needed to keep upto global finance.

Once again stock exchanges have asked to extend trading hours till 7.30 PM:

Leading bourses have proposed to extend the timing of stock trading up to 7.30pm to better align Indian markets with global trends and boost business, but several brokers are opposing the move, citing logistics and employee-related issues, market sources say.

Currently, trading commences on the bourses at 9am and closes at 3.30pm, with 15 minutes each of pre-open and post-closing sessions. There is also a proposal to align equity market timings with that of commodity derivatives, which are traded till late evening hours though exact trade hours are different for different commodities. Various proposals on the table include extending trade hours till 5pm, 5.30pm and 7.30pm.

Exchanges have, in the past, proposed to extend the timings, but all such proposals have always met with a strong resistance from brokers, while regulator Securities and Exchange Board of India (Sebi) has so far maintained a neutral stance and wants any move to be based on views of all stakeholders, including bourses and market intermediaries. Some brokers said they would have to call employees in two different shifts for a longer trading period of over 10 hours and all their clients would have to be assigned at least two relationship managers.

Mobis Phillipose has a piece saying we need a cost benefit analysis of the move:

Some like it hot, some like it cold, some like it in the pot, nine days old. The views on extending trading hours of stock exchanges, unsurprisingly, are even more diverse than porridge preferences.

Porinju Veliyath, a well-known value investor based in Kerala, tweeted that investors need only two hours in a whole week to trade, adding there is “nothing wrong in 24×7 trading for gamblers”. On the other end of the spectrum, there are arguments that extended hours of trading are good for investors, since they can exit or even enter positions as soon as new information becomes available.

Brokers’ associations are dead set against increasing trading hours, saying it will increase costs and help large firms gain share from small and medium-sized broking firms. Then there are some harried traders, who want exchanges to at least provide a lunch break, if they decide to go ahead with longer trading hours; while some others are hoping the extension is long enough to warrant two shifts at their firms, rather than wreck their schedules.

Judging by the cascade of reactions, it’s safe to say that this is a decision that affects a vast number of people, not only in broking or trading operations, but also in ancillary industries. So the least one can ask for is a reasonable debate before the matter is settled. And whoever is pushing for longer trading hours should stand up and provide a cost-benefit analysis to justify the move.

He looks at multiple studies and experts views and ends saying:

All told, while longer trading hours might make sense for some markets such as currencies and commodities, where overseas markets typically drive price discovery, there is not much of a case when it comes to cash equities.

As Yuval Harari in Sapiens says how we have become a specie which is so obsessed with financial markets…


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