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June 30, 1999

After-Hours Trading:The Unanswered Questions - Nasdaq Traders Question Details and Demands for Af

By Michael L. O'Reilly

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Patrick C. Ryan has questions about an after-hours trading session on Nasdaq, some more practical than others.

As the president and head trader at McLean, Va. brokerage firm Ryan, Lee & Co., Ryan doesn't even know if his office is heated late in the evening, never mind exactly how many traders he'll need to cover a night session. "I'm not sure if all the participants have thought about all the consequences from an extra session," he said. "We need to take things one step at a time."

Ryan, like many traders, is struggling to plan for an after-hours

session in the wake of

the National Association of Securities Dealers' announcement to extend trading hours in Nasdaq's 100 largest stocks.

In late May, the NASD - Nasdaq's parent - announced that its board had approved preparations for extended trading hours to run from 5:30 p.m. to at least 9 p.m. every week-

night, with voluntary participation from market makers, broker dealers, trading systems and order-entry firms.

But despite its well-publicized announcement, the NASD has offered no formal proposal and scant details for an after-hours session.

"Without a proposal, it's hard to know how to prepare systems or settlement for after hours," said Kenneth Pasternak, president and chief executive

of Jersey City-based Knight/Trimark Group, parent of Nasdaq wholesaler Knight Securities. "Certainly I know how it might work, but I don't have any details."

The NASD did announce it expects to run an exten-

ded session with two-sided markets, with voluntary participation from liquidity providers. All regular procedures and regulations would be enforced, with night trades identified as next-day transactions.

Originally, the NASD proposed a September launch, hoping to move in step with a similar launch on the New York Stock Exchange. But with the NYSE delaying any night sessions until late next year, the NASD has since backed away from its September goal.

But even without a formal proposal or firm date, the NASD strongly expects to launch after-hours trading sometime in the near future.

With the NASD committed to extended hours, market makers, broker dealers and other market players first have to decide whether to even participate in a voluntary night session. If they do choose to participate, firms need to determine how to staff a night session, and how to handle orders after hours.

Staffing a Desk

At a small firm like Ryan, Lee & Co., which currently has two traders, expanding the desk could be a major undertaking. Ryan speculates that he would need to hire at least four more staffers to sufficiently handle an evening trading session: a trader, a registered representative, a principal and a manager.

"For large firms, it's not a major staffing problem," he said. "For a regional full-service firm, they're not going to be able to extend to 9 p.m. Where will you find qualified people? You can't just get them off the street, and you can't transfer people from the regular session."

He added that finding qualified traders for an evening session could create problems all over Wall Street, with thousands of potential positions needing to be filled.