Mumbai: Fifteen years after the launch of screen-based trading, the stock market is getting ready for another extension in trading hours, following a proposal by the capital market regulator, the Securities and Exchange Board of India.
While brokers are sceptical about the benefits of the move, the timing variance with the banking system, which opens later and closes earlier, may lead to hitches, market operators say.
Tough call: Stockbrokers at their terminals during the Diwali special trading session at the Bombay Stock Exchange on 17 October. Punit Paranjpe / Reuters
“In the early 90s, the market used to be open between 12 noon and 2.30pm. But when it was extended to 10-3.30(pm), few people complained as it was manageable. This extension to 9-5 is likely to make the lives of the brokers difficult,” said K.R. Choksey, chairman of KR Choksey Shares and Securities Pvt. Ltd, associated with the stock markets for five decades.
While the benefits of an extension are not tangible at this stage, the potential pressure on the workforce seems daunting.
“In a city like Mumbai, even for a 10am opening, people have to start from their homes at 8 and by the time they close and reach home it’s 7 in the evening,” Choksey said. “The extension means we have to start two shifts. In these days of low brokerage, that can prove to be a death blow.”
The extension would also lead to longer hours at post-trade processing units such as the custodian banks and back offices of brokerages.
“We will have to work in shifts,” said Raghuvir Mukherji, a senior official with a Mumbai-based custodian arm of an overseas bank.
In case of foreign institutional investors (FIIs), custodians need to “match electronic contract notes of brokers with client instructions”, he said. “This activity usually happens after market closing. With the late close and increased volumes, this activity might take much longer.”
Under the open outcry system, where traders shouted and signalled each other to exchange share prices and seal trades, the market was open for less than three hours between noon and 2.30pm. Total trades were just about Rs300 crore per day but brokerages were as high as 1.5-2%.
Today, while brokerages have shrunk drastically to less than 25 paise, volumes have zoomed to around Rs1 trillion per day.
One of the major arguments laid out in the Sebi discussion paper is that the extension will help align India with global markets for better price discovery. But the current extension proposal doesn’t chime with the US markets (which run from about 7pm to 2.30am IST), which have maximum impact on domestic movement, nor the Singapore or Dubai bourses, which trade Nifty derivatives.