Donna Block
Share World
For months now my husband, the spending phenomenon, has been nagging me to get a real job and get back into my pre-journalistic profession – stock-broking. And to tell you the truth I’ve been seriously thinking about it.
After working on Wall Street for most of my adult life and watching the markets’s wild moves of late I’ve been pining for the hustle and bustle of “life on the street”. Then, last week came the big announcement – The New York Stock Exchange (NYSE) and the Nasdaq Stock Market had finally caved in and agreed to extend their trading hours.
Even though I’ve always found handling other people’s money stressful, knowing that the market would close precisely at 4pm everyday was very comforting. I had the evening to decompress, plan for the next day and see my family. Now, the change in trading hours will have a dramatic effect on many in the industry.
For more than a century the NYSE has opened each day at 9.30am and trading would end at 4pm. Even the younger, more technology- oriented Nasdaq exchange, which exists only in the computer ether between trading houses, kept to a schedule laid out when a broker’s most important tool was a pencil, not a computer.
But now after years of resisting longer trading hours – and after several attempts to extend them failed because of lack of interest – the United States’s major stock markets are going ahead with plans to trade stocks for several additional hours in the evening. And 24-hour trading may not be far behind.
Market watchers are keen to point out that one of the reasons extended trading hours are finally getting off the ground is that individual investors in the US have turned stock investing into a national obsession.
One New York broker claims he can’t go to a dinner party or out with his kids on a Saturday without a conversation turning to the stock market. “It gets to the point where my entire life is revolving around my work, I need a break once in a while also,” he said.
Extending market hours may be great news for trading junkies, but the longer hours could stretch the resources of some of the smaller brokers and specialist firms that keep the floor of the NYSE running smoothly. The head of trading at one firm said: “Most clerks at the NYSE already get to work two hours before trading starts and stay two hours after it’s over, making sure the paperwork gets done properly. I know how Wall Street works, and these firms are not going to hire a whole lot of new staff for extra hours. So you’re going to get the fatigue and boredom factors, and all of the problems that go with it.”
Extended trading will not only change the lives of the thousands of traders and clerks but also all those who make their living in and around the exchanges.
More trading hours may be on the cards but the mechanisms needed to put on an evening trading session have already hit some snags, forcing the Nasdaq to push back its timetable from the end of July to a probable start in September. There are also a number of unresolved issues that must be answered before such a monumental change takes place.
Investors trading in the off hours may be avoiding the crowds, but those who attempt to trade securities when traffic is light will be giving up in profits what they gain in convenience.
Generally, more participants mean better prices for both buyers and sellers. There is also the risk of illiquidity, which amplifies the potential for market manipulation and can lead to volatile stock prices. During the day it is relatively easy for a seller to find a buyer. But at night when there is less traffic it may become more difficult.
Companies whose stocks are being traded in the late session will face demands for information from investors long after headquarters has closed for the day. Trades made in the late session would be considered to be next-day transactions, meaning that mutual funds, which by law must report the value on their assets once per day, might rely on 4pm prices to do so. Newspapers and wire services that provide stock prices to investors around the world would also have to decide which closing prices to publish.
The fact that so many questions remain unanswered, even as the exchanges are preparing to take on a late session, shows how the exchanges have fallen victim to a handful of aggressive alternative trading systems that are already using cheap technology to provide a forum for late-night trading.
But for all you local brokers out there, don’t worry. You won’t have to stay up till 4am waiting for the trading session to end.According to David Shapiro of Societ Gnrale Frankel Pollock: “A few traders may have to stay up late if they’re holding foreign positions but this is very much a local market.”
As for me, I think I’ll take away my husband’s credit card, stay put and get some sleep.