Sebi frowns on plan to extend trading time on poll result day

Brokers’ body wanted special market session on May 16

Capital market regulator Securities and Exchange Board of India is not in favour of tinkering with the trade timing on May 16, the day the result of the Lok Sabha elections will be announced.

The thinking within Sebi is extending market hours — an unprecedented move — will only aid speculators and be of little help to small investors, people with direct knowledge of the development say.

Sebi’s stand could dash hopes of many brokers who had requested it to extend trading time by an hour and a half on May 16 (Friday) and to keep the market open on May 17 (Saturday) to fully factor in the poll outcome.

A senior executive of a stock exchange says the idea of an extended trade timing has almost been shelved for now.

Broker bodies, the Association of National Exchanges Members of India and BSE Brokers Forum, had last month sent the proposal to extend equities, market timing to Sebi and stock exchanges.

On May 16, the leads will start trickling in from morning but the final result is likely to come only after 3.30 pm, beyond trading time for the equities segment in India.

“There has been no precedence of making accommodations for volatility in markets arising out of election results; such a move can interfere in the normal market activity. Most retail investors may not even benefit and it could only benefit punters,” says a regulatory source.

The Indian market had reacted sharply to the Lok Sabha election results on the previous two occasions. It had zoomed 17 per cent on May 18, 2009, while trading had to be halted after the market hit the lower circuit on May 17, 2004.

This time, too,

the market, largely banking on a Bharatiya Janata Party victory, will be vulnerable to any unexpected outcome.

Sebi, meanwhile, has asked stock exchanges to strengthen their trading and surveillance systems to avoid any untoward event on the election result day.

Exchanges have been particularly asked to monitor ‘algo’ orders and trades in the futures & options segment. Bourses have also been asked to conduct ‘mock stress test’ to ensure they are able to handle possible shocks that might arise from sudden increase in volumes.

Exchange officials say preparations are being done with experiences from previous election result days in mind.

The finance ministry, too, has called a meeting of the Financial Stability and Development Council next week to ensure the financial markets are geared up for trading on the election result day. This meeting is likely to be attended by all financial sector regulators, including Sebi, the Reserve Bank of India and the Insurance Regulatory and Development Authority, besides senior finance ministry officials.

Market players have said if the demand for extension of trade timing isn’t met, foreign investors might look at the foreign exchanges where derivative contracts based on Indian markets are traded.

Timing the moves

• Brokers’ body had requested Sebi and exchanges to extend trading hours on May 16
• Exchanges said there were no operational difficulties but Sebi’s approval was awaited
• Sebi is not in favour of altering trade timing on the day of election results, as that might add to volatility and benefit punters more than small investors
• Market had seen sharp moves on the previous two election result days
• Regulator has also asked exchanges to beef up their systems and surveillance to ensure smooth trading