The National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) have announced a special trading session on Saturday, January 20, 2024, as both exchanges will remain closed on Monday, January 22 due to a public holiday. This one-day closure of the leading Indian stock exchanges is likely to impact trading volumes and liquidity next week.
The NSE and BSE informed stock brokers and investors on Friday that they will remain closed on January 22, which is a public holiday declared by the Reserve Bank of India. However, to test their business continuity plans, both NSE and BSE will conduct special live trading sessions on Saturday, January 20.
Reasons Behind the Special Saturday Trading Session
According to stock exchange officials, the special trading session on Saturday will serve two purposes:
- To test the preparedness of stock exchanges for handling potential disruptions and switching to disaster recovery sites.
- To assess the functioning of the backup systems and processes at the disaster recovery sites of NSE and BSE.
This mandatory switchover to disaster recovery sites is a part of the business continuity framework laid out by the Securities Exchange Board of India (SEBI) for stock exchanges.
Timings of the Special Trading Sessions on Saturday
The NSE and BSE will conduct two live trading sessions on Saturday, January 20, 2024:
- First Session: 9:15 AM to 10:00 AM
- Second Session: 11:30 AM to 12:30 PM
During these sessions, all futures contracts will have an operating range of 5%. Stocks with an upper and lower circuit limit of 2% will remain within those limits.
The second trading session from 11:30 AM onwards will take place on the disaster recovery sites of NSE and BSE. It will begin with a pre-open session from 11:15 AM to 11:30 AM, followed by a normal trading session from 11:30 AM to 12:30 PM.
Why Do Stock Exchanges Have DR Sites?
Disaster recovery (DR) sites host mirrored technological infrastructure and data backup systems to ensure business continuity for stock exchanges during unexpected disruptions such as technical glitches, power outages, data breaches, fires, floods, etc.
According to SEBI guidelines, stock exchanges are required to be able to seamlessly transition their operations from the primary data centre to the DR site within two hours in the event of a disaster scenario.
DR sites enable exchanges to restore trading services and data availability within the stipulated time in case of any disaster events. This protects the stability and smooth functioning of stock markets during potential crisis situations.
Impact of Holidays on Stock Trading
Though stock exchanges periodically remain closed on public holidays, these closures can influence trading activity and market dynamics in multiple ways:
- Reduced liquidity and trading volumes
- Increased volatility and price fluctuations
- Limited participation of institutional investors
- Shift in investor sentiment and risk appetite
At the same time, special trading sessions on select Saturdays ensure that exchanges can maintain compliance and periodically test systems readiness through live trading. This facilitates the resilience and business continuity of stock markets even around holidays.
In conclusion, the special Saturday trading session of NSE and BSE will assess the preparedness of market infrastructure for seamless functioning during disruptions, while the Monday closure protects the stability of markets on a public holiday. With adequate planning, stock exchanges aim to balance holidays, compliance requirements and uninterrupted services for investors through initiatives like disaster recovery sites and special trading sessions.