RBI’s Working Group recommends extension of market hours

An Internal Working Group of Reserve Bank of India (RBI) on Comprehensive Review of Market Timings has suggested calibrated extension of Currency Market (Foreign Exchange Market) hours, from 9 am to 9 pm for both Over the Counter (OTC) and Exchange Traded. At present the markets close at 5 pm.

Key Highlights of Draft Report

As per the draft report prepared by RBI’s working group, although extension of market timings is expected to provide benefits like improved onshore price discovery, better pricing of post market hours information or data and possible shift of offshore volumes to onshore but there is a view that it may entail higher costs to stakeholders.

The central bank is in process of reviewing and rationalising Forex regulations so as to provide flexibility in operation in currency markets, which would allow calibrated extension of market timings.

Recommendations by Working Group-

Call Market: Its timings could be extended till 6 pm. As Real Time Gross Settlement (RTGS) system is operational till such time.

Bond Market: On account of lack of demand from participants group recommended that the government bond market timing can be retained and the market be closed at 5 pm.

G-Sec Trading: Currently there have been no requests from any market participants seeking extension of market hours for G-sec trading.

Most of the Foreign portfolio investments (FPIs) investing in India already have Asian base and therefore the internal group notes that extending timings may not lead to larger volume and mentions that feedback from market also supports that current timings are more than adequate.

Moreover regarding products, participation and position both for residents and non-residents, extension of market hours would complement these policy measures.

What are ETD and OTC?

Exchange Traded Derivatives (ETD) are traded via central exchange with publicly visible prices i.e. on a centralized exchange while Over the Counter (OTC) derivatives are for companies that are not listed on a formal exchange and traded between two parties (bilateral negotiation) without going through an exchange or any other intermediaries.

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