'Benefits will outweigh costs of extended trading in equity derivatives'

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Rituraj Baruah and Rohit Vaid | 22 May, 2018
Even as the equity brokers are trying to figure out a way to cope with the longer trading hours on equity derivatives, many feel the benefit of "real-time" alignment with global markets would outweigh infrastructure challenges.

Some Indian brokerage majors have already started to shore-up their manpower and other resources after the Securities and Exchange Board of India (SEBI) permitted stock exchanges to extend trading hours for the equity derivatives from October 1, 2018.

The market regulator has allowed stock exchanges to set their trading hours between 9 am and 11.55 pm, similar to the trading hours for commodity derivatives segment.

At present, trade in equity derivatives takes place from 9.15 am till 3.30 pm.

Equity derivative are instruments whose value is at least partly derived from the underlying equity security. Such derivates can be used to hedge the risk associated with taking a position on equity by setting a limit on losses.

"Currently too, commodities markets are opened till midnight, so the learning and infrastructure is already in place. It is just about increasing headcounts, which can be better planned once more details are published by exchanges," Santanu Syam, Chief Operating Officer of Angel Broking, told IANS.

"From customers' perspective it is a positive step as they can take benefit of any global news or impact. Currently most of them are not able to participate during such odd hours," he added.

"It's a welcome move as Indian markets would be aligned with all major markets, beginning with Tokyo and (ending with) New York and all in between," Tradebulls Securities' Director and COO Dhruv Desai said.

"As of now we see an escalation in the manpower of our advisory teams in the offline business and some minor staff increases in the risk management and other back office units. We may need some staff to work on shifts as change settles down," said Desai, adding that the online business would have no impact as the requisite infrastructure was adequate to manage the extended hours.

According to him, initially, the market volume would spread across the number of hours, but over a period of time, the volume would increase in the market.

However, details are still awaited on risk management system from stock exchange, working of clearing corporations, framework for settlement process, monitoring of positions, system capability and surveillance systems.

The advantage of digital framework, which India currently has, will come in handy, said Equity99's Senior Research Analyst, Rahul Sharma.

"All the market management processes are digitised. There should not be any transition issues for brokers. However, their fixed costs could go up as the brokers will need more manpower. Let's hope for the best that rise in volumes will offset the expenses," Sharma told IANS.