NYSE after-hours trading approved Move is step toward a 24-hour market

May 21, 1991|By New York Times News Service

WASHINGTON -- Taking the first big step toward round-the-clock trading on the New York Stock Exchange, the Securities and Exchange Commission approved a request yesterday to extend the exchange's hours beyond the 4 p.m. closing bell.

The Big Board made the request last year in response to its steady loss of market share to other exchanges in the United States and abroad.

"At first blush, the proposal before us today may seem incremental, but its effect will be felt around the world as a sign that United States markets are changing their habits to meet the needs of an increasingly globalized marketplace," said Richard C. Breeden, the chairman of the SEC.

"In fact, we already have a 24-hour securities marketplace, because at almost any hour of the day anyone can buy or sell securities of U.S. companies that are listed in Tokyo, London and other markets."

The extension of trading -- to 5 p.m. for individual stocks and 5:15 for large "baskets" of different securities -- is the first phase of the exchange's decade-long plan to offer 24-hour trading ultimately. But it is a clear departure from the auction-type trading that now exists on the floor of the exchange between 9:30 a.m. and 4 p.m., which leads to price fluctuations throughout the trading day.

The after-hours trading will not have varying prices for each security. Instead, computers will be used to match buyers and sellers based on the price of the stock at 4 p.m., which will remain the official exchange closing price.

Officials at the exchange said they would begin the two new and overlapping trading sessions for individual stocks and baskets of securities on June 13.

While the exchange charges members based on the size of their trading activity, officials said they would waive fees in the after-hours trading for the first six months of the new trading activity.

Catherine Kinney, an executive vice president of the exchange, said the waiver of fees for six months was intended to attract new business. She predicted that the additional trading time could add volume of 15 million to 20 million shares, roughly 10 percent of the average trading day.

No leading brokerages have said whether the reduced rate would be passed on to individual and institutional customers.

Reflecting the growing competition, several regional exchanges, which had opposed the New York exchange's request, have filed requests with the SEC in the last few days to extend their trading hours. Commission officials said they were considering the requests to determine whether those markets have the computer capacity to expand trading.

The objections raised by the Boston, Midwest, Pacific and Philadelphia exchanges and the National Association of Securities Dealers noted that increasing the New York exchange's hours would draw business away from them.

The longer session of the two is intended primarily for institutional traders, such as pension funds, mutual funds and investment houses, and it is where most of the new trading is expected. Each basket would have to include at least 15 individual stocks and have a value of more than $1 million, but the new rule has no explicit requirement on the concentration of each basket.

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