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Trading Transformations

The trading community may have a price to pay, but investors were left untouched

The day that the announcement came that the Securities and Exchange Board of India (SEBI) had allowed longer trading hours, the business media was scrambling around to establish the likely impact of this decisions. Here’s my list of the deep and long-lasting changes that extended trading hours will have.

Punting on stocks can finally be a nine-to-five job. Day traders can now leave home and get back at the same hour as office workers, thereby making it easier to pretend that theirs’ is a regular profession. The business news channels will be big beneficiaries simply because this is a massive 45 per cent increase in their prime-time hours without having to generate extra content. They’ll now have that much more ad inventory to sell. Restaurants and other eating places in areas where brokers’ offices are thick on the ground will lose business because by the time the trading day is packed up, it will be time to go home. Chemists will sell more antacids as the high-stress part of the day will be longer. The after-hour book-keeping will extend later into the night, so spouses and kids will be angrier and thereby have to be placated more intensively and expensively on weekends. And so on.

Beyond that, investors (as opposed to day-traders) should expect no impact at all. This extension of trading hours is something internal to the broking business. The mere existence of longer trading hours will lead a certain type of investor to trade more, leading to more business for brokers and exchanges. Supposedly, some of the business that the Indian exchanges have lost to Singapore will come back. There will also be a longer overlap of trading hours with Asian exchanges in the morning and European ones in the evening, which will probably add to intraday volatility.

By the way, neither SEBI nor the exchanges have made any mention of mid-day breaks. It’s all very well to match trading hours with other Asian exchanges, but none of them have continuous day-long trading. Tokyo breaks from 11 a.m. to 12:30 p.m., Singapore and Hong Kong from 12:30 to 2 p.m., and Shanghai from 11:30 to 1. p.m. Relentless day-long trading is more the Western style, with Frankfurt (the German work ethic, I guess) being the worst with its 11-hour day. We should instead emulate our Asian brothers and allow an hour or two for a leisurely lunch and a refreshing nap.