The Proposal and Rejection
It was earlier reported that the Securities and Exchange Board of India (SEBI) was considering extending trading hours for the cash market. The proposal aimed at gradually extending trading hours in a phased manner. Here’s what the proposal entailed:
- Phase 1: Extend trading hours for index futures and options (F&O) from 6:00 PM to 9:00 PM.
- Phase 2: Further extend index F&O trading hours until 11:30 PM.
- Phase 3: Extend cash market trading hours until 5:00 PM.
However, SEBI rejected the National Stock Exchange’s (NSE) proposal to increase trading time due to a lack of consensus among the broker community. Brokers protested against the move, and as of now, the extended timeframe for trading remains shelved.
What Is Extended Trading?
Extended trading, also known as after-hours trading, occurs outside the official trading hours of the exchange. During regular trading hours, U.S. exchanges open at 9:30 AM and close at 4:00 PM EST. Extended trading allows traders to buy or sell securities beyond these hours, typically through electronic marketplaces. It tends to be limited in volume compared to regular trading hours.
Benefits and Risks
Benefits of Extended Trading:
- Flexibility: Traders can react to news and events that occur outside regular hours.
- Access to Global Markets: Extended trading allows participation in global markets.
- Opportunity for Liquidity: Some investors seek liquidity during extended hours.
Risks of Extended Trading:
- Volatility: Prices can be more volatile due to lower liquidity.
- Limited Information: News and corporate announcements may not be available during extended hours.
- Higher Bid-Ask Spreads: Wider spreads can impact execution prices.
While the proposal to extend trading hours was intriguing, SEBI’s rejection highlights the complexities involved. As traders, we must weigh the benefits and risks of extended trading carefully. Whether or not extended hours become a reality, understanding the dynamics of after-hours trading is essential for informed decision-making.
Remember, the stock market never sleeps, but prudent investors do! 😉📈🌙