Renewed Interest in Round-the-Clock Derivatives Following Sudden Market Volatility

The dramatic and unpredictable market swings observed on April 7 have reignited the conversation around establishing a 24/7 derivatives trading environment in India. Several market participants and industry leaders believe that allowing round-the-clock trading in the equity derivatives segment may offer investors a valuable tool for managing risk during volatile periods, especially those caused by sudden geopolitical or macroeconomic events.

Contents

Renewed Interest in Round-the-Clock Derivatives Following Sudden Market Volatility Diverging Industry Views: Risk Management or Speculative Gateway?Opposition from Brokers and Analysts Rooted in Practical Constraints Liquidity a Major Hurdle: Will Extended Hours Find Market Depth?SEBI’s 2018 Framework and the Delayed Implementation

The Securities and Exchange Board of India (SEBI) had approved the framework for extended trading hours back in 2018, permitting exchanges to operate the equity derivatives segment from 9:00 AM to as late as 11:55 PM. However, due to the absence of consensus among market intermediaries and infrastructure institutions (MIIs), the proposal never advanced into implementation.

Market volatility on April 7 revived demand for 24/7 derivatives access.
SEBI approved extended trading hours in 2018 but lacked stakeholder agreement.
The proposal requires alignment between brokers, exchanges, and infrastructure bodies.

Diverging Industry Views: Risk Management or Speculative Gateway?

The proposition has drawn a wide range of responses. Tejas Khoday, Co-Founder and CEO of FYERS, strongly supports the idea. He argued in a public statement that a 24/7 F&O (Futures & Options) market could serve as a crucial tool to hedge overnight risks that arise when global markets continue to move while Indian exchanges remain shut. His argument is centered around the increasing frequency of unpredictable global events—such as tariff announcements, geopolitical conflicts, and central bank policy changes—that can catch Indian investors off-guard.

On LinkedIn, Khoday emphasized the need for realistic risk mitigation frameworks, stating, “India needs a 24/7 derivatives market, and we need it now. With wild geopolitical and economic risks, investors face dicey overnight exposure. A round-the-clock F&O market is a critical component that can help investors hedge risks and salvage potential losses when the world moves while we sleep.”

Proponents argue 24/7 markets allow better hedging against overnight risks.
Global events increasingly affect Indian markets outside trading hours.
Advocates view it as a necessary upgrade, not a speculative tool.

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Opposition from Brokers and Analysts Rooted in Practical Constraints

However, the proposal faces significant pushback from brokerages and market participants concerned about feasibility and unintended consequences. Rajesh K, Director at Alice Blue, a prominent brokerage house, voiced caution against a structural overhaul of trading hours in response to sporadic market disruptions. He pointed out that volatility is not exclusive to equity derivatives and that commodities traders routinely navigate such challenges through proper hedging techniques.

He noted that overnight positions without hedging expose investors to undue risk and called for more responsible investor behavior rather than longer trading windows. “These are rare events and we should not be changing the structure of the entire market only in anticipation of this,” Rajesh stated.

Smaller brokers are also apprehensive about the operational costs of extended hours, citing manpower, electricity, regulatory overheads, and staffing logistics as burdens that could outweigh any marginal gains in trading volume.

Brokers warn against overhauling the system due to infrequent volatility.
Cost burdens for smaller firms could outweigh potential business gains.
Calls for investor education on hedging rather than extending hours.

Liquidity a Major Hurdle: Will Extended Hours Find Market Depth?

Market veterans argue that even if SEBI and exchanges approve the framework, the core question remains: will there be enough liquidity in extended hours to justify the effort? Mayank Bansal, a derivatives strategist and hedge fund operator, expressed skepticism. He believes that without deep liquidity, extended hours could become a low-volume, high-risk environment for most traders.

“Lack of traction will be a real issue in the initial years. Without volumes, bid-ask spreads will be too wide to allow efficient hedging or execution,” Bansal noted. He highlighted that while FPIs and NRIs can access hedging instruments via GIFT Nifty, retail Indian investors do not have access due to RBI restrictions under the Liberalised Remittance Scheme (LRS), which bars leveraged trades using overseas remittance capital.

Liquidity concerns remain the top barrier to after-hours trading adoption.
Thin volumes may deter retail and institutional participation.
Indian investors can’t access GIFT Nifty under current RBI norms.

SEBI’s 2018 Framework and the Delayed Implementation

SEBI’s circular from May 2018 permitted stock exchanges to extend equity derivatives trading until nearly midnight. It also mandated that any exchange wishing to do so must submit a comprehensive proposal covering risk management, settlement systems, manpower, and surveillance mechanisms. Though NSE later submitted a phased plan to extend index derivative trading hours—with a session from 6 PM to 9 PM in phase one and a final session until 11:30 PM—the proposal did not receive unified industry support and was sent back.

Despite the deadlock, sources close to the regulator indicate that SEBI remains open to revisiting the proposal provided there is demonstrable consensus from exchanges, brokerages, and other MIIs.