The National Stock Exchange (NSE) has decided to extend the usual trading hours in the derivative segment, citing that the longer hours will give traders more opportunities. The announcement has caused quite a stir and sparked a debate on who will benefit from the extended hours. This article will discuss the changes and how the stock market trading hours extension will impact retail investors.
New timing changes
NSE has decided to extend the market trading hours in the interest derivative segment. Under the existing system interest futures and options are traded from 9:00 AM to 3:30 PM – a total of 6 hours and 30 minutes. In the changed scenario, effective from February 23, 2023, the trading window will remain open till 5 PM. The aim is to converge the trading hours of interest rate derivatives with the trading hours of the underlying market.
It will impact all contracts with expiry beyond February 23, 2023, and contracts written after the date will be available for trading till 5 PM.
- Most market experts believe that extended hours are the call of the hour and the right reaction to India’s increasing global integration. NSE has backed the change stating that “in the highly connected global markets, the Indian stock market reacts to the developments in other major economies and markets in the US and Europe.”
- The extended trading hours will help reduce overnight risks and offer more opportunities to hedge risks arising from global information flow.
- It will increase the scope for more Indian investors to invest and increase foreign investors’ participation with better opportunities to hedge risk with currency and equity F&O.
- It might attract gen Z and millennial investors who may now explore the market investment opportunities after their office hours. It can boost the trading volume and boost revenues for the capital market.
Trading time in other major markets
Major international markets already have extended trading hours like the US and the UK.
US: The normal trading hours of the New York Stock Exchange are from 9:30 AM to 4:00 PM Eastern Standard Time (EST). However, NYSE also has extended trading hours as pre-trading sessions and post-trading sessions. The pre-trading session is from 4:00 AM to 9:30 AM and the post-trading hours are from 4:00 PM to 8:00 PM EST.
UK: The London Stock Exchange remains open from 8:00 AM to 4:30 PM GMT. However, it also has pre and post-trading extended hours, which are 5:05 AM to 7:50 AM (pre-trading) and 4:40 PM to 5:15 PM GMT (post-trading).
Singapore: Normal trading in the Singapore Stock Exchange happens between 9:00 AM to 12:00 PM, and 1:00 PM to 5:00 PM of Singapore Standard Time. The Nifty index futures and options and NSE IFSC Nifty futures and options trade in SGX for the T session between 9:00 AM to 6:10 PM and the T+1 session between 7:05 PM to 5:15 AM the local time.
Japan: The cash market operates from 9:00 AM to 11:30 AM, and then from 12:30 PM to 3:00 PM local time, and equity index futures and options trade from 8:45 AM to 3:15 PM and again from 4:30 PM to 6:00 AM.
Extended market trading hours will certainly be catalytic for increased capital formation. Recently, the Indian market has introduced a T+1 settlement cycle and now the extended trading hours indicate the maturity of the Indian market. The Indian market landscape has undergone significant changes due to multiple regulation changes in the last fifteen months and now the market reacts to the new changes.