SEBI introduces new guidelines for stock exchange outages and extended trading hours in Commodity Derivatives

The Securities and Exchange Board of India (SEBI) has issued a circular on May 27, 2024, introducing a standardized procedure for managing stock exchange outages and extending trading hours within the commodity derivatives segment. This move aligns with a previous directive for the cash market and equity derivatives segment, reflecting SEBI’s dedication to creating robust operational frameworks across all market segments. This directive emphasizes SEBI’s proactive regulatory oversight, aimed at protecting investor interests and fostering a resilient, efficient securities market.

The standardized operating procedure will commence on July 01, 2024. Recognized stock exchanges in the commodity derivatives segment are responsible for implementing necessary system changes to accommodate the extended trading hours and for notifying their members accordingly.

Key provisions of the circular:

Definition of stock exchange outage:

A “Stock Exchange Outage” is defined as the cessation of continuous trading, whether initiated by the exchange or due to external factors.

Notification protocol:

Affected exchanges must promptly notify market participants within 15 minutes via broadcast messages or website updates. Immediate notification to SEBI is also required through a dedicated email address. This ensures transparency and timely information dissemination, enabling informed decisions during disruptions.

Status updates:

During outages, affected exchanges must provide status updates every 45 minutes until normalcy is restored. If trading hours are extended, this must be communicated alongside these updates.

Restoring operations:

Exchanges are tasked with swiftly restoring normal operations using disaster recovery mechanisms and adhering to Business Continuity Planning (BCP) and Disaster Recovery (DR) guidelines from SEBI’s March 22, 2021, circular.

Extended trading hours:

For contracts/products traded until 5 pm / 9 pm, the circular specifies procedures for extending trading hours if trading resumes at least 30 minutes before the scheduled market closure. Similar protocols apply for contracts/products traded until 11:30 pm / 11:55 pm, ensuring consistency and clarity in managing extended trading hours.

Benefits of the new procedures:

• Enhanced transparency: Improved communication during exchange outages keeps traders informed.
• Reduced disruption: Faster resumption of trading minimizes inconvenience for investors.
• More time to trade: Extended hours offer greater flexibility in case of technical glitches

This revamp by SEBI aims to create a more efficient and transparent trading environment for commodity derivatives. With faster response times and extended hours, traders can experience minimized disruption and potentially greater flexibility.