Currency traders may be in for longer working hours if the government has its way. The ministry of finance is understood to be backing a proposal to extend trading hours for currency futures, even though exchanges and brokerages are divided on the subject.

The issue cropped up at a recent meeting between exchanges and finance ministry officials, where it was suggested that trade timings should be extended by two hours to 7 pm. The proposed move, some felt, would help traders respond to global markets.

It was also proposed that FIIs and NRIs should be allowed to trade in currency futures. "Since RTGS (or electronic money transfer) is allowed up to 7:30 pm, payment and settlement issues can be taken care of without causing additional burden on the banking system. Also, it was debated whether to allow for foreign institutional investors' participation in the currency segment since they are allowed to hedge by entering into over-the-counter currency derivative contracts.

The issue will be taken up with the Reserve Bank of India," said a person familiar with the discussion.

Sources said there is no consensus on the issue. "Not all exchanges want longer hours. They also differed on the issue of FII participation. Some felt that it could increase market volatility and would tantamount to de facto convertibility of rupee," according to a person present at the meeting.

The proposal has not gone down well with brokers. In fact, they feel equity market timing should be reviewed as no visible benefits have accrued by opening the market early. However, sections think that a slice of the offshore trading volume, where global investors punt or hedge on rupee, may shift to India if trading hours are extended.

According to Bank for International Settlements (or, BIS), almost half of the turnover in currency derivatives (linked to Indian Rupees) happens offshore.

"Why only in the evening, we need to push in both directions rather," said Ajay Shah, professor at Delhi-based National Institute of Public Finance and Policy. "In the morning, before India opens, the NDF (or non-deliverable forward) market in Hong Kong and Singapore is discovering the price of the rupee. To compete with this, we should start couple of hours earlier at 7 am, and keep the market open till 8 pm to connect with US market" he felt.

Non-deliverable forward is a cash-settled, short-term forward contract on a foreign currency; since rupee cannot be delivered abroad, the contracts are settled in dollar. As per BIS data, NDF market for the rupee exists in Singapore, Hong Kong, New York and London. (Economic Times)