Exchanges cut trading time for commodities derivative market

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The decision is applicable till 14 April and if there is any extension of revised trading timings beyond April 14, the exchanges would inform the members of the same.

Commodities derivative markets will trade for fewer hours starting from 30 March tp until 14 April. All three exchanges — Multi Commodity Exchange (MCX), Indian Commodity Exchange (ICEX) and National Commodity and Derivatives Exchange (NCDEX) — announced on Thursday that trading hours would be between 9 am and 5 pm, starting from Monday. The decision was taken keeping in mind the on-going nationwide lockdown for 21 days because of the novel Coronavirus pandemic and disruptions in the spot market across the country.

The decision is applicable till 14 April and if there is any extension of revised trading timings beyond April 14, the exchanges would inform the members of the same. Even as the government has classified brokerages, market intermediaries and stock markets as essential services, there are 31,000 Sebi registered members and for all of them to get their staff to work has been a challenge so far. According to Narinder Wadhwa, president, Commodity Participants Association of India, the underlying markets are not working so it does not make sense for derivatives markets to work such long hours. “We urged the regulator to consider truncated trading time for commodities as employees have expressed their concerns to members,” Wadhwa added.

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The exchanges stated that they arrived at this conclusion after holding discussions with the Securities and Exchange Board of India. “ In view of the novel Covid-19 virus pandemic outbreak and the nation-wide lockdown of 21 days in the country and pursuant to discussions with Sebi, it has been decided to revise trading timings,” said ICEX. The statements by NCDEX and MCX had similar details. The pre-open session will start from 8:45 a.m. and client code modifications will be allowed from 9 a.m. to 5:15 pm.

Market experts told FE that the move on the part of SEBI and commodities exchanges was a much-needed one. Ravindra Rao, vice president – head of commodities research, Kotak Securities, stated that this was the first time he had seen the reduction in trading hours in the commodities market. “In commodities the European session starts in the afternoon and then the US session which starts in the evening after 6 PM (as per the daylight savings timings). The closure of the 2nd half will have an impact as the US session is taken as a benchmark in the majority of non-agro commodities like metals and energy,” he said before adding that such extreme steps were necessary to control the spread of Covid-19.

Market experts said that fewer trading hours could impact trading volumes in the exchanges. The usual trading hours for the commodities market is between 9 am and 11 pm. The commodities market usually trades in derivatives of gold, silver, crude oil, metals and agricultural products. Navneet Damani, vice president – commodities research, Motilal Oswal Financial Services, said that it was a good move on part of the SEBI since participants were risking their lives to keep the trades going. “ In the last few days, while we didn’t face any problems operationally, the trading volumes had decreased since the hike in margins was announced. Investors had to either cut their positions or stay out of the market,” he said.

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