Bourses seek longer F&O trading hours

Mumbai Even as the SGX-Nifty Gift Connect set to become fully operational from July 3, domestic exchanges are pushing for extension of trading hours for the onshore derivatives market.

Gift Nifty Singapore is making a lot of money through SGX Nifty. By introducing Gift Nifty that money can be brought back to India. At the moment Indian residents can’t trade in Gift Nifty but that may change soon. And bourses are pushing Sebi to allow longer F&O hours to compete with Gift Nifty.

Bourses are waiting for a final approval from market regulator Sebi on the proposal to keep the derivatives market open for longer hours. The SGX-Nifty Gift Connect is set to become fully operational from July 3.

The move is aimed at attracting more trading members for onshore futures and options (F&O) contracts amid risk that global investors could prefer trading at Gift City given the tax benefits.

Talking to Bizz Buzz, Divyanshu Sharma, a trader in F&O, says: “Longer trading hours is a good idea as it will facilitate better risk mitigation and timely reaction to global developments. However, it may not significantly increase earning potentials for those who are already profitable.”

On the other hand, overtrading can trigger more losses to those who are already losing. In my opinion, if Sebi decides to take any action that may trigger higher volumes in F&O segment, it should be coupled with qualification-based entry barrier for retail participation, he said.

Keeping the derivatives market open for longer will help domestic investors hedge their risk better and react to global developments faster.

Sebi seems to be cautious about longer trading hours as on the one hand it will facilitate better risk hedging, on the other hand it will also incur losses to retail traders. Another problem Sebi is facing is that the higher volumes in F&O segment has already started affecting the price of underlying. So, any action that may increase trading activity in F&O segment would be counterproductive.

With SGX Nifty trading now getting routed through Gift City IFSC, there is a solid case for keeping the derivatives market open for longer to maintain the attractiveness of the onshore markets,” said an official.

Is Longer trading span a good idea?

l Facilitate domestic investors hedge their risks better

l Timely reaction to global developments

l Already who are profitable may not significantly increase earning potentials

l On flipside, overtrading can trigger more losses to those who are loss making

l With higher F&O volumes affecting price of underlying, current action would be counterproductive