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CSE to extend trading hours from 3 Jan.

23 Dec 2021

  • New trading hours 10.30 a.m. to 2 p.m.
BY Shenal Fernando The Colombo Stock Exchange (CSE) has by a CSE circular dated 22 December announced that the Board of Directors of the CSE has decided to extend the trading hours of the market to four hours from its current three hours and 30 minutes, and therefore, from 3 January 2022 onwards, trading will commence at 10.30 a.m. Consequently, from 3 January onwards, the pre-open session will be from 10 to 10.30 a.m. and the open auction will be at 10.30 a.m. Trading will commence at 10.30 a.m. after the open auction and will be stopped at 2.30 p.m. as usual. Commenting on the possibility of extending the trading hours of the CSE to five hours, CSE Chairman Dumith Fernando told The Morning Business yesterday (22): “We will take this a step at a time; we will evaluate the effects of this increment. We did not want to make such a drastic change right away as the market is doing very well at the moment and a lot of investors have gotten used to this trading time period. We do not want to do anything that is detrimental to the market, so we will take it in small steps. But the idea obviously is that if it helps the market to have long hours, we will consider implementing it.” Prior to the disruptions caused by Covid-19, the CSE was open for five hours per day for trading. However, trading hours were initially reduced to two hours (11 a.m. to 1 p.m.) when the market was reopened on 11 May 2020 after being closed for seven weeks from 16 March due to the curfew imposed, following the escalation of the spread of Covid-19 in Sri Lanka, only opening for a curtailed trading period on 20 March. Subsequently, the trading hours of the CSE were extended to three-and-a-half hours (11 a.m. to 2.30 p.m.) from 26 May 2020 onwards. Speaking to The Morning Business, an industry source claimed that there are pros and cons to this new development. Explaining further, he stated: “Prior to the pandemic, the trading hours were from 9.30 a.m. to 2.30 p.m. and with the Covid-19 disruptions, they reduced the trading hours to three-and-a-half hours. However, now the Covid-19-related restrictions are being eased and considering the record turnover observed over the past 18 months, the regulators’ point of view would be that such an extension of trading hours would be beneficial for traders. Furthermore, the CSE can progressively move back its usual trading pattern. However, I feel that people who started trading recently are used to the three-and-a-half-hour trading period and may become fed up if the trading period is extended, and could have an adverse effect on market sentiments.” He further stated that he expects the CSE to eventually go back to its previous five-hour trading period. Most equity markets in the world are open for five to seven hours a day for trading, while smaller markets may be open for shorter periods. This shorter trading session implemented in the CSE has proved to be effective in pushing the market to all-time high levels in terms of turnover and the All Share Price Index (ASPI). Therefore, a legitimate question arises as to whether a move back to a five-hour trading session could be detrimental to the market. A smaller trading session results in the compression of trading activities within a small period, which translates to greater liquidity, smaller spreads, and leads to a more efficient market. Shorter trading sessions also result in less volatility as the likelihood of material news being broken during the trading period is lower.  

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