Late night trading: Exchange is ready, says Ashish Chauhan, MD and CEO, BSE

Ashish Chauhan, MD and CEO of Bombay Stock Exchange (BSE), in an exclusive talk with Zee Business's Ketan Joshi, said BSE is capable of implementing the new directive of SEBI that allows exchanges to extend the trading time for equity derivatives till 11:55 PM from October 1. He added the exercise may boost the number of investors in the market from current 2 per cent to about 20 per cent in coming 20-25 years. Here are the edited excerpts from the chat:

Q: Is Bombay Stock Exchange (BSE) ready for late night trading?

A: BSE's India International Exchange (IIE) located in Gandhinagar's Gift City has been working for 22 hours for more than a year, since its inauguration. IIE, inaugurated in January 2017 by Prime Minister Narendra Modi functions between 4 am to 2 am of the next day and closes just for 2 hours in a day. It trades in commodities, currencies, equity derivatives and bonds. I feel that BSE,  which has an experience of functioning for 22 hours, that is more than 15 hours (approx), as per the new directive, will be able to work with ease. 

Q: Can you talk a bit about the settlement mechanism that will be available in situations where a person has already traded?

A: The mechanism of settlement is already available in the commodity market for past 15 years. I feel that we are just supposed to replicate or follow the mechanism that is being exercised.

Q: This increase in time is being opposed by small brokers. How will you make them understand the step?

A: Small brokers are an asset to BSE and we have always tried our best to keep them with us. Secondly, we have seen numerous such reforms in past 25 years and each one of them was opposed, like at the time of automation of trading, screen-based trading as well as at the time when margin trading was brought in, but all of them were implemented and are running successfully.  Margin trading has empowered the Indian market. 

I feel, the brokers will be able to provide their services for a longer duration at a small investment because they have all facilities like software and hardware among others that is needed for trading. Today, almost everything has been automated and brokers have automated themselves over the last 20-25 years. In addition, about 70-80 per cent brokers have entered in the commodity business and have all facilities that involve in the job including manpower. Thus, I feel that they will provide services without a problem. I would also like to add that brokers who face trouble in doing their jobs, will be supported by us in their endeavours. 

Q: On one side regulators promote delivery based transactions and on the other hand they are benefiting the traders by increasing the time. Don't you think that the decision is contradictory?

A: Yes, there is a contradiction in the process. But, the regulator, SEBI, has announced the delivery based derivatives before doing so. In addition, deliveries are also available in commodities and it is traded till 12 am in the night. Now, deliveries will also be available in equity derivatives and it can be traded till 12 in the night. I feel SEBI has done some good homework before it made the announcement. 

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Q: Do you think that the volume, as well as expenses, will increase by increasing the time?

A: Less than 2 per cent Indians invest in the stock market. I feel, this increase in time may give an opportunity to a certain percentage of people to invest. These are people who are doing a 9 am to 6 pm job or some other work and don't get the time to plan their investments. Now, brokers will be able to pull them into the system and make them invest in the market, once the extended market hours come into effect. 

I would like to say that in coming 20-25 years, this 2 per cent investors is like to go up to 20 per cent. 

Q: Will you be providing some incentives to make Indian investors to adopt this new time frame?

A: Earlier in 1993-94, the markets were opened for just two hours between 12 pm to 2 pm, later it was extended from 10 am to 3 pm, and now it opens from 9 am to 3:30 pm but no such incentives were offered to the investors. Consider, this time extension as a facility for the investors in which he/she can think to trade at any point in time. But, I will also suggest that they must not start trading every second.