The Reserve Bank of India has formed a working group under the leadership of RBI Executive Director Radha Shyam Ratho to review trading and settlement timing of financial markets regulated by the Reserve Bank, according to a statement. The group is expected to submit its report by April 30, 2025.
The regulator said synchronised market and settlement timings across various financial market segments can lead to efficient price discovery and optimisation of the liquidity requirements.
Over the last few years, there have also been several developments including increased electronification of trading, availability of forex and certain interest rate derivative markets on a 24X5 basis, increased participation of non-residents in domestic financial markets and availability of payment systems on a 24X7 basis, thus requiring a reconsideration of India’s financial markets timings, which typically remain open between 9 AM-5 PM.
“Setting up a working group to review trading and settlement timing shows RBI’s commitment to modernizing market operations and aligning them with global standards. This review, involving various market participants, could lead to better trading hours and more efficient settlement processes, potentially making our markets more accessible to global investors by managing time zones,” said to Venkatakrishnan Srinivasan, Founder, Rockfort Fincap.
“The recommendations could improve market efficiency and reduce risks in settling trades, making the market more robust for all participants. However, implementing new trading hours and settlement systems could require significant changes to existing market practices and systems,” he said.
Mandate of working group
The group headed by Ratho, has members from banks, primary dealers and other bond market players. It is tasked with reviewing the current trading and settlement timings for various financial markets regulated by the Reserve Bank including functioning hours of market infrastructures for trading, clearing, settlement and reporting of transactions.
The group must identify the frictions points in overall functioning of markets on account of current trading and settlement timings in terms of transmission of prices/rates across markets, volatility and distribution of trades, liquidity requirements and netting efficiency.
It will examine cross-country practices relating to market timings and their influence, if any, on market development in terms of participation, liquidity, and volumes. The group will also review the implications, including benefits, costs and challenges in revising the current timings for trading and settlement.
