Longer trading days on way whether folks want them or not


Markets responding to online pressures for evening sessions

June 06, 1999|By Bill Atkinson

THE TRADITION of trading stocks for 6 1/2 hours and then recharging the batteries for the next day appears to be on the verge of extinction. But many in the industry don't see a need for change, and argue that adding hours to the trading day raises too many questions.

Brokers, money managers and even many traders are greeting the proposals by the major stock exchanges to allow investors to buy and sell shares during evening hours about as warmly as a deep recession.

"I don't see the need for it," said Charles W. Shaeffer Jr., a financial consultant at Wheat First Union in Baltimore. "If we are told to do it, we will do it."

The Nasdaq Stock Market Inc. and the New York Stock Exchange have long been comfortable trading stocks from 9: 30 a.m to 4 p.m. even in a galloping bull market.

But recently the exchanges have come under increasing pressure from upstart stock markets that want to offer investors trading after hours and from investors who are buying and selling stocks online and want more flexibility. Both threaten to steal commissions.

Nasdaq, a stock market connected by a vast computer network, is under pressure from "alternative trading systems," such as Eclipse Trading Inc. and Wit Capital Corp. These firms plan to offer evening trading with their own computer systems.

To protect itself, Nasdaq's parent, the National Association of Securities Dealers, recently approved a proposal to move forward in setting up a second session of trading from 5: 30 p.m. to 9 p.m. or 10 p.m.

The New York Stock Exchange said late last week that it won't be offering the service until after Year 2000 worries are well past.

The fear among traditional brokerage houses that on-line trading is growing forced Merrill Lynch & Co. Inc. to announce plans to offer online trading to its customers.

"The investment business is changing," said Joseph L. Antrim, executive vice president at Richmond-based Davenport & Co. LLC. "Change is always difficult."

For some, change is welcome.

"The stock exchange is coming into the 20th century as we approach the 21st century," said Jeremy Siegel, professor of finance at the Wharton School in Philadelphia.

Siegel argues that commerce has become a 24-hour proposition, thanks to computers and the Internet. If supermarkets and drugstores can stay open around the clock, why shouldn't stock markets, he asked.

"The stock exchange has no more hours than it did 100 years ago," Siegel said.

"I would let the market speak. Instead of the question, `Is there a demand there?' let's open the store and see."

But there are many unresolved questions about extending trading hours. Will all stocks be open for trading? Will brokerage houses have to hire additional people to staff the evening shift? How and when will price and volume of the shares traded be reported to the public?

Nasdaq expects to lump the volume of trades from the evening session into the next day's session, but it is still uncertain how it will report prices.

Initially, Nasdaq's 100 most active stocks would be traded after hours, a fraction of the 4,474 stocks it lists.

The New York Stock Exchange would select its 500 most actively traded stocks for after-hours trading, but it is unsure how volume and prices would be reported.

The questions have newspapers and wire services in a quandary as to how to pass the information on to their readers.

"We are a little bit short on specifics," said Randy Picht, business editor at the Associated Press in New York, which sends stock tables to 900 newspapers across the country. "We are waiting and watching for some of the specifics, but the bottom line is we are going to make the prices available to newspapers and to newspaper Web sites."

Vickee Adams, a spokeswoman for Dow Jones & Co., the parent of the Wall Street Journal and Barron's, said those publications will be in "great shape when we have a better sense of what is going to happen. It is too soon to tell."

Nowhere is there more uncertainty than in the brokerage houses where executives see little need for extending hours.

"We have no demand from our clients for evening trading," said James W. Brinkley, president of Legg Mason Wood Walker Inc., a Baltimore-based brokerage firm. "You can do all the trading you want to do in the market currently."

"Changing market structure simply for convenience sake, I'm not sure that is the reason to do it," said Andy Brooks, head of equity trading at Baltimore-based T. Rowe Price Associates Inc. "The train is moving down the track at 90 miles an hour, the question is why? Is it good for the marketplace? Is it good for investors?"

Brinkley said Legg, which has 1,100 brokers, may have to add another shift to handle clients' trades, or reschedule the hours of some brokers and employees. "We would have to be prepared to provide the service," he said.

Antrim envisions a small staff to take trades in the evening. "You won't get your broker, but you would have someone quite willing to accept your order," he said.

He and others aren't sure that volume will be heavy enough to generate more money.

"How much money you make in the business depends on how organized you are as a salesman and the quality of your ideas," Shaeffer said.

Brinkley wonders if a better alternative isn't just adding an hour to either end of the trading day. Opening the markets an hour earlier would capture more investors from Europe, he said.

Like the others, Morry Zolet, senior vice president of investments at Ferris, Baker Watts Inc. in Baltimore, isn't keen on after-hours trading.

"I don't really see a need for it," he said.

Zolet is swimming in business these days.

"This is what bull markets bring," he said. "If we were in a bear market I certainly don't think people would be rushing to have extended hours. I don't even think it would be an issue."

Pub Date: 6/06/99

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