The Reserve Bank of India has established a working group led by RBI Executive Director Radha Shyam Ratho to review the trading and settlement timings of financial markets regulated by the Reserve Bank. The group is expected to present its findings by April 30, 2025.
Synchronizing market and settlement timings across different financial market segments can enhance price discovery efficiency and optimize liquidity requirements, according to the regulator.
In recent years, there have been significant developments such as increased electronification of trading, availability of forex and certain interest rate derivative markets on a 24X5 basis, higher participation of non-residents in domestic financial markets, and the availability of payment systems 24X7. These factors have prompted a reevaluation of India’s financial market timings, which traditionally operate between 9 AM-5 PM.
“The establishment of a working group to review trading and settlement timings demonstrates the RBI’s dedication to modernizing market operations and aligning them with global standards. This review, involving various market participants, could lead to improved trading hours and more efficient settlement processes, potentially attracting global investors by managing time zones,” said Venkatakrishnan Srinivasan, Founder of Rockfort Fincap.
“The recommendations could enhance market efficiency and reduce risks in trade settlement, making the market more resilient for all participants. However, implementing new trading hours and settlement systems may necessitate significant changes to existing market practices and systems,” he added.
The working group, headed by Ratho, comprises members from banks, primary dealers, and other bond market players. Its mandate includes reviewing the current trading and settlement timings for various financial markets regulated by the Reserve Bank, including the operational hours of market infrastructures for trading, clearing, settlement, and transaction reporting.
Additionally, the group will identify potential challenges in the market’s overall operations due to current trading and settlement timings, such as price/rate transmission across markets, trade volatility and distribution, liquidity requirements, and netting efficiency.
The group will also examine international market practices regarding trading timings and their impact on market development in terms of participation, liquidity, and trading volumes. Furthermore, it will evaluate the implications, including benefits, costs, and challenges, of revising the current timings for trading and settlement.
The RBI’s initiative to review trading and settlement timings reflects its commitment to enhancing the efficiency and robustness of India’s financial markets. The recommendations of the working group could drive positive changes in market operations, making them more competitive and attractive to global investors.
Published on February 7, 2025
