Hunting volumes, BSE to open 10 minutes early

Street wisdom says most of the traded volumes happen in the first and the last thirty minutes on any given day.

The Bombay Stock Exchange (BSE), in a nifty move, is trying to leverage the early window of opportunity to capture some much-needed volume.

It has decided to open the bourse 10 minutes earlier — at 9.45 a.m — for trading from Friday, December 18. The closing time remains unaltered at 3.30 p.m.

Bigger rival National Stock Exchange hasn’t responded yet though the buzz on the street is it may extend its trade timings by as much as half an hour.

Meaning, competition would force far longer market hours upon participants.

BSE said there will be no change in the timings of any other session in both the segments — the block deal window timings in the equity segment will remain the same (9.55 a.m. to 10.30 a.m).

“The move will bolster volumes in the derivatives segment for the BSE, but a time advantage alone will not help it garner greater volumes,” said Deena Mehta, managing director, Asit C Mehta and a former chief of the bourse.

Madhu Kannan, MD & CEO of BSE, told DNA that by opening ten minutes early, the bourse hoped to increase focus on the launch of its mid-month derivatives contracts on December 18.

“The BSE needs to act to bring back interest in its derivatives segment. This should be looked at in the context of our various initiatives of bringing liquidity back” to the exchange, he said.

In the cash market, institutional investors are likely to play a key role in the success of the move, as they account for 42% of the columes in the cash market.

“Most of the institutional players would like to come into markets when both the exchanges are open. So this would mean only marginal volumes addition for BSE,” said Anand Rathi, chairman of Anand Rathi Financial Services and also a former chief of the bourse.

Currently almost all of the Rs 80,000 crore worth of derivatives volumes take place on the NSE. In the cash market too, the NSE accounts for 75% of the trading volumes.

The Securities and Exchange Board of India (SEBI) had on October 23, 2009 formally allowed stock exchanges to extend daily market timing by two hours.  Since then, there has been a lot of debate on its viability and difficulties related to funds transfer in the evening as Real time gross settlement (RTGS) system is not available after 4.30 pm.

The poll conducted for market participants also showed majority of them not being in favor of extended market hours

The move would mean greater alignment for the BSE with markets in the far-east, say some.

Hong Kong markets close 5 minutes after India currently open. The extension would give an additional 10 minutes of trading time for participants from both markets.

So will this lead to BSE garnering more volumes? Market participants feel the intention seems to be just that, but the advantage is expected to be short-lived with the NSE expected to counter soon.

“There would be participants wishing to take advantage of overnight information who will go to the exchange as soon as it opens. As a result, there would be greater volumes on the BSE but it is expected that the NSE will react very soon,” said Prithvi Haldea, founder-managing director of Prime Database.

An NSE spokesperson said that the exchange would be going for a fresh consultation with members. “We intend to consult market participants and try to arrive at a consensus,” the person said.