Brokers divided on longer trading hours in equity derivatives
Mumbai: The broking community is divided about extending trading hours for the equity derivatives segment but is deliberating it and is expected to reach a decision shortly, said Madhabi Puri Buch, chairperson, Securities and Exchange Board of India (Sebi).
“At the moment, the broking community itself is divided. It’s a divided house, and there is a lot of discussion that is going on. They will soon reach some conclusion one way or the other in some reasonable timeline,” Buch said while addressing an event of the Industry Standards Forum.
“Of course, we haven’t reached a stage where we have asked the investors themselves what they want. So that’s a different level of consultation and feedback that we may require.”
The regulator will also need to consider the views of market infrastructure institutions, she said.
Last year, the National Stock Exchange (NSE) floated a proposal to extend the trading hours for equity derivatives to 9 pm, instead of 6 pm now.
Another proposal was to have a separate trading window from 6 pm to 9 pm, which was to be extended to 11 pm.
NSE, at the time the largest stock exchange, had said it was planning to extend the trading hours for equity derivatives in a phased manner, following representations from various stakeholders.
Last year, the markets regulator formed the Industry Standards Forum to address the concerns of the broking industry. The Association of National Exchange Members of India, the Bombay Stock Exchange Brokers Forum, and the Commodity Participants Association of India are part of the forum.
The regulator also highlighted the misuse of proprietary trading, wherein brokers are passing off client trades as proprietary trades to evade margin rules and taxes. When an order is placed via a trading terminal it must be clearly sta-ted as a client trade or a proprietary transaction. If a trade is on behalf of a client, the broker needs to collect margins from the client. If a broker tags a trade as being proprietary, the margin requirement will be adjusted from the broker’s funds deposited with the stock exchange as part of networth compliance.
On the legality of recommendations provided by Industry Standards Forum, Buch clarified that these are well-crafted and in consultation with Sebi, and therefore would be legally binding.
Buch said Sebi will issue a circular stating that brokers will have to follow the recommendations issued by the forum.
