Bourses' battle riles brokers

A day after the Bombay Stock Exchange and the National Stock Exchange decided to postpone the extended trading time to January 4, brokers said they were appalled by the one-upmanship and lack of coordination between the exchange authorities.

They were also upset over the fact that the decision to extend the trading time was taken without consultation. While the fresh date for implementing the new trading time is final with no scope for extension, brokers said the move would hardly help them.

Deven Choksey, managing director, Kisan Ratilal Choksey Shares and Securities, said, "I believe it is only institutional investors, proprietary traders and investors bringing fresh cash each morning can trade in the market. One, who is expecting dues from stock exchange clearing houses or validation of payment made through pay-in, can't trade in the morning hours as brokers won't have the file for an update."

One of the constraints, he mentioned, was the difference of four hours between the pay-in and the payout of the exchanges. This gap was too big, he added.

"For the market to witness higher volume, the regulator and exchanges need to pay attention to some of the structural changes required now. Simply extending working hours won't help," said Choksey.

The Securities and Exchange Board of India has asked both the exchanges to improve coordination, as it favours healthy competition.

The issue came up because first BSE advanced timing by 10 minutes and NSE followed by announcing its decision to start trading at 9 am - something that prompted BSE to follow suit. BSE's logic for a 10-minute early opening was that the Hong Kong stock exchange closes for lunch at 10 am Indian time, and a 15-minute gap will help BSE get some early benefit from Hong Kong-based traders and gain volumes in derivatives trading.

But exchanges said some of the fears of brokers also seemed ill-conceived. The preparedness of banks and other intermediaries to function early may not be that big an issue. The currency segments of NSE and the MCX-Stock Exchange starts at 9 in the morning and collections of margins are happening.

Even commodities exchanges also function till 11.30 pm and there have been no systemic issues due to longer trading hours. Some pressure will come on brokers and their staff which they will have to handle.

Some brokers criticised the role played by NSE, which had granted a licence to the Singapore Stock Exchange for offering trading on the Nifty futures. This was a source of revenue for NSE in the form of licence and transaction fees.

NSE then raised concerns of trading volumes and opportunities going out of the country to regulators and brokers on account of trades being executed on SGX Nifty. If they were concerns about volumes going out of the country due to the limitation of market hours, they could easily modified the contract with SGX to suit Indian timings. If there was resistance from SGX the same contract could be cancelled, brokers said.

Also, NSE's proposal to start trading at 9 am did not serve any purpose as India is two-and-a-half hours behind Singapore and therefore even at 9 am Singapore time, Indian time will be 7:30 am. So invariably even when Indian markets start at 9 am, NSE would have missed two and a half hours of Singapore trading lead.

Brokers said the Indian markets should ideally be linked to markets in developed countries as in the case of other asset classes such as commodities and currencies.  This would require the stock markets to operate beyond 3.30 pm. However, NSE has been opposing the stance citing reasons of lack of readiness of banking system, brokers and RTGS facility.

The reason, they said, was quite surprising as their own platform offering commodities trading operates from 10 am to 11:30pm for the last six years. The brokers associated with NCDEX operate till 11:30 in the night and were used to the RTGS system for clearing of margins. Clearing of NCDEX is done by NSCCL subsidiary.

Dharmesh Mehta, head, Enam Securities said, "NSE could have cancelled the licence for Nifty trading on Singapore."