WASHINGTON -- The Securities and Exchange Commission is expected to take an important step today toward 24-hour trading of stocks in the United States, approving a request by the New York Stock Exchange to extend trading beyond the closing bell at 4 p.m.
The decision, which is expected at an afternoon meeting of the five commissioners in Washington, comes as the Big Board faces growing competition from other leading exchanges in the United States and abroad.
"I think the exchange sees this as not the last step, but the first step, in the creation of an electronic environment of supplementing the daylong activity on the floor," says Richard C. Breeden, chairman of the SEC. "We have 24-hour trading right now. The only question is where it exists. This proposal is a small step toward addressing that."
Breeden and other officials say Wall Street traders had increasingly turned to London and Tokyo to execute trades after the exchanges in the United States closed.
Last year, the New York Stock Exchange announced a five-part plan to establish 24-hour trading by the year 2000.
The rule expected to be adopted today is the first phase of the plan and would create two new extended trading sessions. One, closing at 5 p.m., would be for regular trading by individual investors. The other, closing at 5:15 p.m., would be for trading of baskets of stock by institutional investors. Each basket would have to contain at least 15 individual stocks and have a total value of more than $1 million. That session is basically an attempt to steal this growing, but somewhat arcane, form of trading away from London.
William H. Heyman, the new director of market regulation at the SEC, says he has been told by exchange officials that the new trading sessions would probably begin within four to six weeks after the commission approved extended trading sessions. The Big Board's trading day now runs from 9:30 a.m. to 4 p.m.
"They have been gearing up for it by testing their software," Heyman says. He says it is not possible to determine how much extra revenue this could mean for the Big Board, although the SEC has been given estimates that about 20 million shares of stock in U.S. companies trade in London each day.