Kenneth Pasternak, president and chief executive of Knight/Trimark Group in Jersey City, said only six of his firm's 600 employees work the early evening after-hours stock markets. But as longer hours go into effect on more exchanges, Pasternak envisions having as many as 100 employees on the 4 p.m. to midnight shift.
"I think [extended trading hours are] inevitable with the internationalization of the stock market," Pasternak said. "It'll be a big deal measured in terms of years, and not of months."
After-hours connectivity and information transparency will have to catch up to make evening hours trading as efficient as the regular day time trading session, he noted. "But we're still on a learning curve," Pasternak said. Extended hours "are a young phenomenon."
Not everyone is as sanguine as Pasternak about the prospects for longer trading days. Buzzy Geduld, president of Herzog Heine Geduld, in Jersey City, said his traders are taking the imminent extension of working hours "poorly, very poorly." And Geduld has his own doubts: "I'm not sure anybody can work 7:30 a.m. to 6:30 p.m."
Overwhelming Dissatisfaction
A Security Traders Association survey during the association's annual conference in Palm Desert, Calif., showed overwhelming trader dissatisfaction with the idea. Sixty- three percent of almost 140 buy- and sell-side traders, electronic communications network professionals and others opposed any extension of trading hours. By the same margin, traders said they would not participate in a voluntary extension of hours, and strongly agreed that a "clear break" needs to be enforced between normal hours and any extended schedule. A separate survey conducted by Midwood Securities, a New York-based institutional broker dealer, revealed that 60 percent of 140 money managers who responded indicated that they probably would not participate in extended trading hours.
Yet exchanges are plowing ahead. The National Association of Securities Dealers on Oct. 25 launched a limited pilot program on Nasdaq that extended availability of trade reporting and quote dissemination to 6:30 p.m. Eastern time. The Chicago Stock Exchange started a pilot e-session' on Oct. 29, for electronic transmission and execution of certain limit orders up to 6:30 p.m. Eastern time.
Both pilots expire on March 1, 2000. The New York Stock Exchange decided this summer to delay full implementation of its extended hours until mid-2000, to give Wall Street time to cope with Y2K. But all exchanges are expected to join the push toward longer trading days.
"Markets need to move forward," said James Spellman, a spokesman at the Securities Industry Association in Washington.
Spellman acknowledged that there hasn't been an extraordinary clamor by investors for longer hours. Most after-hours activity comes from the Pacific Coast, he noted. And most investors follow a buy-and-hold strategy that keeps after-hours volume low.
So who's driving the extended hours bandwagon? On the sellside, after-hours trading is supported by some of the largest firms and the online brokerages, including ECNs. Some ECNs say they see demand from individual investors for extended hours. Buyside trading firms, on the other hand, generally look askance at after-hours trading, most likely because their business is not driven, like the sellside, by volume transactions. Indeed, almost 70 percent of the respondents in the Midwood Securities survey said they believe ECNs will benefit the most from extended trading hours.
ECNs Power
Spellman said ECNs, which are already operating after the regular sessions close, are forcing the big exchanges to adapt or risk getting left behind when after-hours volume does pick up. "The markets are building for the future," he said.
Debbie Zoldan, senior equity trader at Seaport Securities Corp., a small broker dealer in New York, offers another take. "This is being driven by the large corporations," Zoldan said, as well as media outlets and advertising campaigns that claim that more than 40 percent of Americans who now own stock want to be able to trade it any time they like.
Kevin Conway, head of equity trading at Maxus Investment Group, a buyside firm in Cleveland, noted that most traders have access to Instinet and other systems for after-hours executions if they need it. But they don't generally need after-hours access, he contended. Conway, like other experts, observed that most investors buy a stock to keep it. "Occasionally we'll get a retail customer reacting to a late news event," he said.
That will change, Geduld, Pasternak and others agreed, as extended hours take hold, pilot programs expire, and all stocks trade all day.
Geduld said his firm is hiring additional employees and planning split shifts to deal with a daily trading volume that already spreads Herzog Heine's staff too thin. Pasternak said he's already had some younger traders volunteer for the anticipated later shifts, sensing an opportunity to be at the start of something big.
