Hello everyone,
As per an article on Economic Times today (25th Sep 2023), NSE is finalizing plans to extend trading hours for the derivatives segment.
NSE is proposing an evening session, from 6PM to 9PM, after the usual market hours from 9:15AM to 3:30PM.
It may also extend the evening session to 11:30PM at a later stage.
This is being done so that Super Traders get an opportunity to react to global events sooner.
What do you think about this decision?
Keeping us on the edge for longer and especially so for discretionary traders 
Also now option price dynamics would change and with no backtest data, systematic automated traders on options would be bit at the sea.
Oops… lots of work for us in that case. Double shift 
Extended trading hours mean technically algorithmic price decay will be slower. Market dynamics will change, strategies will change, etc.
But, one thing is certain people’s health will negatively be affected due to more screentime. Also, brokerage might go up because infrastructure handling cost will go up.
More Job Opportunity
Personally do not like this.
Again looks like they want to collect more & more tax by overtrading traders.
And less health and less money
In my opinion, while this move is good but seems premature for a market like India that is still in the process of maturing. India currently has the highest F&O volume and open interest in comparison to any other country (as per data from FIA). Therefore, it is reasonable to assume that the primary purpose of hedging might be overshadowed by increased speculation and trading activities.
In more developed markets, the open interest for OTM options is almost negligible. I recall that during the time when SGX NIFTY was active, even near ATM strikes exhibited significant slippage. Curating a synthetic future would cause a significant spread cost.
Acknowledged that India is progressing and drawing substantial foreign investments, which naturally prompts investors to seek risk mitigation tools. To cater to this need, we have already established the IFSC in GIFT City, where exchanges operate for 21 hours a day (in contrast to the 16 hours on SGX). I have personally visited GIFT City and witnessed the impressive development of infrastructure and the opportunity for nurturing a robust FinTech ecosystem. FIIs can easily hedge their positions using F&O instruments denominated in USD (Currently NIFTY and BANKNIFTY are active though).
Instead of extending trading hours, it might be more prudent for the RBI to permit AMCs and similar registered entities to engage in hedging activities by floating a FME within IFSC. Naturally, trading and hedging must go hand in hand to support increased trading volumes and open interest. Having said this, if this extension is implemented (which most likely would), a greater portion of trades would be driven by automated systems and follow rule-based strategies. This could potentially bring in an era of increased algorithmic trading activity.
Here’s my thoughts regarding extension of trading hours.
Even though BSE is one of the oldest exchange in the world, primary trading activity came in during late 1980s. Since then Indian Stock markets have gone through several changes in the past. During 1980s trading used to be from 12PM to 2.30 PM, just for 2.5 hours only.
In 1990-91, trading hours were extended just by 30 mins more, from 12 PM to 3PM. Until 1992 BSE was the King, since the transactions were offline few brokers who had the right contacts made lot of money. Harshad Mehta scam made it worse which wiped out large part of brokers and retailers.
NSE came in around 1994 which started giving tough competition to BSE in every aspect. When NSE launched its screen based trading called NEAT, so many protest were there, brokers claimed that many would lose jobs. But still NSE went ahead with it.
In 1997 trading hours were extended to 9.55am-3.30pm. Lot of opposition from brokers and traders were there for the extension of timing. Many said they do not have the bandwidth , resources and many protested to revert back to old timings. Nothing happened. Exchanges went ahead with new timing. In 1994, NSE total turnover was just around 6200 Crores, after change in market timing in the year 1997-98 it’s turnover jumped to 9,08,691 crore.
Again in 2009, timings were extended further. Instead of market open at 9:55 am, it was revised to 9am where pre open starts and from 9:15 trading started. I remember there were lot of outcry in the media taking about this new timing. Many opposed it as usual. But since then we have been trading between 9:15 to 3:30 pm. Every time there was a increase in trading hours, it directly denotes more profitability for the exchange.
Now with the new proposal of extension of trading hours, where extended market hours between 6pm to 9pm which eventually will be extended till mid night.
But the deep worry is from large group of active traders who sit in from of system between 9 to 3, who are bombarded with tons of information every second , who are constantly in the urge of making trading decisions. This is a field with high burnout rate. Now with extension of timing, it will be really hard for them. This is one of the main reason why I moved to rule based trading in 2014 and completely moved to automated trading from 2017.
Now there are second set of traders who are more worried, they are system based traders who started their trading journey recently with all kinds of backtest. They are already in worried state because introduction of every day expiry with different indices already started killing their backtest results now with market timing extension they are worried that their backtest won’t be relevant anymore.
Such scenarios always happen. When you build a trading system like breakout/trend following or any kind of setups that are based on market microstructure then there is no need to panic. I use to think all I have to do is create a trading system that gives out standing backtest results and follow it with rigid discipline, but system based trading is much more than that. It took me years to realise this.
Looking at the past am 100% certain that trading hours extension is going to happen for sure. Whether you are prepared or not, it doesn’t really matter. Only thing that is constant in this world is Change. Humans are good in adapting and changing to environments, that’s how we have survived for 1000s of years. So people who complain about this market timing extension will eventually adapt and survive.
For working community it may be helpful to participate in the evening session, but it will take time to see the pros and cons of this decission.
Most of the traders who are against this is because they have backtested strategies based on 375mins trading time frame now that will all go for a toss what i find weird is why are they giving a break and then restarting at 6PM they should have continued till 9PM or may be continue till 6pm then latter extend to 9 and then 11pm we already have commodities market which trade till midnight no one is complaining about that, as for health issues etc etc no one is forcing traders to trade for all the time i can give you my example i trade morning sessions in Nifty, Bank nifty am done by 10:45-11 am i dont trade after that even if we have market hours for 23hrs a day like in some countries i will still not trade them all the time…am not saying people should follow this rule all am saying is its upto an individual as to when he wants to trade there are many professions that work in shifts like medical, fire department, police’ department, airport personel, the list is endless do they complain i dont think so they work in their own shifts i guess its upto a trader as to how long he wants to trade ours is an evolving market and there is nothing wrong in extending the trading hours as it will benefit many
Brokerage cost could remain the same, as the trades go up. So, more the trades, more the profits for the brokers?
One good outcome could be the sudden movements in prices at opening could come down. There will still be some of this, but a big chuck of it could come down. That also means people will be less hurried and take it easy given more time to trade.
Agree that a lot of trading systems, manual or algorithmic that depend on human emotional behavior will see a total change. More time definitely means better price action.
Overall I see a net positive for Indian markets. Initial skepticism will be there, as with everything. But eventually people will grow accustomed to it.
