A majority of traders, importers and exporters of commodities including bullion and non-ferrous metals have submitted a plea for extended trading hours in currency futures in a bid to meet the challenge posed by the NDF (non-deliverable futures) market.
Currency futures at national exchanges currently trade between 9 am and 5.30 pm. Trading should be extended to 11.30 pm to cover the closing of London and New York currency markets on lines similar to the hours granted to the trading of commodities futures at national commodity exchanges, trade sources said.
?This will benefit hedgers such as importers, exporters and SMEs as well as create depth in our currency markets,? a commodity trader said. The restriction of trading hours till 5 pm would be restrained for the importers and exporters who may have to take pricing decisions during the late hours.
Even in commodity exchanges, especially in bullion trade, off-market deals based on quotes of international commodity exchanges, the price fluctuations proved to be too volatile till such time the regulators extended trading hours to 11.30 pm.
?Across the globe, the bullion market functions around the clock and such a measure would provide wider opportunities to cover the currency risk involved in dealing in volatile metal markets,? Suresh Hundia, president, Bombay Bullion Association (BBA) said. The move will provide an efficient price discovery compared to the OTC market and NDF markets, after the closing hours of trading in the country. OTC and NDF markets also run counter party risks of settlements since such off-market deals do not fall under any regulation.
?Non-ferrous metals prices are discovered globally on multiple platforms like commodity exchanges spanning the US, Europe, India and China. Cash settlement prices (CSP) which form a basis of physical pricing across the globe are declared well after 5 pm IST. So, the pricing decisions for importers, exporters and the domestic industry are taken well into the late hours,? Hemant Parekh, vice-president, Bombay Metal Exchange (BME), said in an official communiqu? with the Securities and Exchange Board of India (Sebi).Parekh also said that currency hedging may serve the purpose better if the window was kept open for an extended time-period to cover price movements of all international markets. Extending the trading hours in currency derivatives segments will definitely increase the liquidity to cover the NDF market which is based on offshore markets, a top official with MCX-SX said.
The wide fluctuation in the currency markets makes it imperative for hedgers to use the exchange in in the most efficient manner, but they would not be able to do so in case of the restrictive regime where other currencies are traded at hours when the rupee is not, a leading equipment manufacturer said.