B'lore brokers see no benefit in extending trade time

Will it bring back business to India from Singapore is a moot point

Terming the Securities & Exchange Board of India’s (Sebi) move to let bourses extend trading hours as primarily aimed at winning back business to India from Singapore, Bangalore’s broking community, found no merit in it. 

Will it bring back business lost to India, they mused given that traders in India are confronted with several taxes? While some wondered if it would be beneficial at all, others were wary whether attendant systems, specially banks, would be able to gear up for rigours of settlements in the new regime.

Speaking to Deccan Herald brokers said flight of business from India to Singapore was not due to timing but because of Centre’s taxation that hardly left anything with brokers and traders. Citing Securities Trading Tax (STT) and service tax as main culprits with volumes moving to SGX Nifty in the one and half years it came into existence, they said many traders, including institutional investors and overseas corporate bodies found it advantageous given benign structure in Singapore.

Thanks to STT and service tax, they said, overhead expenses multiplied making transactions expensive.

While volumes are bound to go up due to extended hours, likewise cost of transactions too would shoot up, they observed, for, traders have to pay taxes whether they made money or not.

Further, they said, irrespective of time being extended or stays same, majority of business is conducted within one hour of opening and last hour of closing. So, it does not mean more business or convenience, they said.

Major concerns

Their major fear was whether systems were geared up to take up heavy data that would build up as a result. Also, they added, while currently they manage pay-ins and pay-outs after closing of trade at about 6 and 6.30 pm with extended timing reconciliations would take it beyond 8 pm. “Though banks claim they have all systems to meet the eventuality,” in reality though, they said “experiences show money transfers do not take place same day, specially high value cheques. It will be messy and give room for systemic risks, heavily burdening all stakeholders. Across the board — brokerages, banks and depository participants, all have to be upgraded to handle additional burden.” Futher, brokerages have to beef up staff and infrastructure besides opening up early all of which will lead to further costs and overheads, they noted.

Conceding that extended trading hours suited country’s working hours, they wondered if hours are extended/stretched in sync with other major global bourses as well, then country’s bourses will have to be open 24 hours. Explaining the futility of time extension, they said, nearly 20 to 30 per cent of clients put their trades by 11 am exhausting their exposures.

Depending upon market behaviour, if sentiments are positive/buoyant, they again enter around 2 or 3 pm to square up positions. Otherwise, from 11 am to 3 pm it is a lean period on exchanges.

Retail traders hardly make three to four calls a day. Only institutional investors and overseas corporate bodies may take advantage of extended timing to match quotes, they said.