‘Can affect life outside trading’: Zerodha’s Nithin Kamath on pitfalls of extended trading hours for F&O

By admin On Feb 20, 2023

Amid much social media chatter about an impending decision from NSE on extending trading hours for F&O segment, a very important market voice weighed on this subject — Zerodha CEO Nithin Kamath.

“Extended trading hours for F&O will maybe signal the maturity of our markets. They also level the playing field for domestic traders against international traders and are also good for capital markets businesses in terms of revenues, but I’m conflicted,” said Kamath on Twitter on Monday.

Rumours are doing rounds on Twitter that NSE will extend F&O (futures and options) trading hours to 11:55 pm. Kamath said this could affect life of traders outside trading.

“I’m unsure how it (extending trading hours) will affect the mental health of active retail F&O traders in the long term. Tracking P&L for long hours is stressful & can affect life outside trading. Also, active traders don’t make money, primarily due to overtrading. Longer hours can accentuate this,” he tweeted.

I’m unsure how it will affect the mental health of active retail F&O traders in the long term. Tracking P&L for long hours is stressful & can affect life outside trading.

Also, active traders don’t make money, primarily due to overtrading. Longer hours can accentuate this. 2/3

— Nithin Kamath (@Nithin0dha) February 20, 2023

Kamath also said extending trading hours could be counter-productive in the long-term.

“While it could boost revenues for the capital markets business in the short term, I’m unsure if retail investors will end up doing better. This could then potentially lead to lower participation and liquidity in the longer run, which will affect everyone,” tweeted Kamath.

Kamath’s Twitter thread turned out to be divisive with some saying they appreciate his concerns for traders’ well-being while some said the move to extend trading hours will bring a level-playing field with retail investors trading whenever they have time instead of fixed timings.

As many as 89 per cent of the individual traders lost their money in the F&O segment in FY22; they witnessed an average loss of Rs 1.1 lakh during the year, according to a study by market regulator Securities and Exchange Board of India.

While releasing a detailed study on the P&L of individual traders in the F&O segment, the report, released last month, highlighted that the total number of unique individual traders who traded through the top 10 brokers in equity F&O segment jumped over 500 per cent to 45.2 lakh during FY22 as against 7.1 lakh during FY19.

“During FY22, 11 per cent of individual traders in equity F&O segment made a profit with an average profit of Rs 1.5 lakh. The percentage went down marginally to 10 per cent for active traders, though the average profit made by them went up to Rs 1.9 lakh during the same period,” Sebi said.

The market watcher further highlighted that 90 per cent of the active traders incurred average losses of Rs 1.25 lakh in FY22.