 has announced that it has extended the trading hours for interest rate derivatives to 5 p.m. The change will be effective on February 23rd. At present, the contracts are traded between 9 a.m. and 3:30 p.m.){kind=link}
Nearly a month after becoming probably the first nation to introduce a shorter trading cycle of T+1, India has taken another big step towards increasing investor participation.
The National Stock Exchange (NSE) has announced that it has extended the trading hours for interest rate derivatives to 5 p.m. The change will be effective on February 23rd.
At present, the contracts are traded between 9 am to 3:30 pm. This move by NSE is aimed at converging with underlying market timings, NSE said in a circular.
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What Are Interest Rate Derivatives
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Interest Rate Derivative (IRD) is a financial derivative contract whose value is derived from one or more interest rates, prices of interest rate instruments, or interest rate indices.
Interest Rate Futures (IRF) are standardised interest rate derivative contracts traded on a recognised stock exchange to buy or sell a notional security or any other interest-bearing instrument or an index of such instruments or interest rates at a specified future date, at a price determined at the time of the contract. Interest rate futures include money market futures. Currently, IRF contracts are available on Government of India securities, Treasury bills, and MIBOR, as per the NSE.
Interest Rate Option (IRO) is an option contract whose value is based on Rupee interest rates or interest rate instruments. Currently, IRO contracts are available on Government of India securities.
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Changes Announced By NSE
As per the National Stock Exchange’s circular, the following are the focus points for investors:
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1. Contracts for the expiry month of February 2023 will be available for trading until 05:00 PM on the expiry day, i.e., February 23, 2023. Other interest rate derivative contracts’ trading hours will not change.
2. All existing contracts with an expiration date beyond February 23, 2023, and all new expiration contracts introduced thereafter shall be made available for trading until 5.00 pm on the expiration day.
3. There shall be no change in CP Code modification or give-up timings, and the same will continue until 5:30 PM.
4. There shall be no change in the final settlement price computation mechanism, i.e., it will be calculated based on the last 2 hours of VWAP of NDS OM trades, subject to a minimum of 5 trades.
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Mixed Reactions By Experts
This change by the NSE has attracted mixed reviews from experts in the stock market industry.
Commenting on the development, Zerodha CEO Nithin Kamath tweeted that extension of the trading hours could “potentially lead to lower participation and liquidity in the longer run”.
“I’m unsure how it will affect the mental health of active retail F&O traders in the long term. Tracking P&L (profit and loss) for long hours is stressful & can affect life outside trading. While it could boost revenues for the capital markets business in the short term, I’m unsure if retail investors will end up doing better. This could then potentially lead to lower participation and liquidity in the longer run, which will affect everyone,” Kamath stated in a series of tweets.
“Extended trading hours for F&O will maybe signal the maturity of our markets. They also level the playing field for domestic traders against international traders and are also good for capital markets businesses in terms of revenues, but I’m conflicted. I’m unsure how it will affect the mental health of active retail F&O traders in the long term. Tracking P&L for long hours is stressful & can affect life outside trading. Also, active traders don’t make money, primarily due to overtrading. Longer hours can accentuate this.”
On the other hand, Anuj Shah, Chief Business Officer, Axis Securities, said, as per an ET report, “An extension in the F&O market timings can also help us pull back the trading volumes that go offshore post our trading hours, offering additional trading and earning opportunities to the market participants.”
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