Fred Rittereiser (ASTN chairman) quoted in Philadelphia Inquirer article on extended trading hours:
phillynews.com
Stock exchanges prepare to offer extended hours
It's one way to capture online traders' business, some believe. Others say it won't be
worth the expenses.
By Joseph N. DiStefano
and Bob Fernandez
INQUIRER STAFF WRITERS
Someday, perhaps as early as July, investors will be able to hurry home from work, pop dinner
in the microwave, and settle down at their computers for an evening of buying and selling
investments.
"I can see the Brady Bunch sitting around with their dogs, trading stocks," groaned Arnold
Staloff, head of Center City's Bloom Staloff Corp., which trades stocks and options in
Philadelphia, New York and Chicago.
Staloff, like other professionals, says "around-the-clock" trading is inevitable, given the rise of
the Internet and the globalization of money markets. But he worries that the public, especially
Internet-obsessed speculators, isn't ready. Nor, perhaps, are the nation's stock markets.
In the past, buyers and sellers of stock could meet and do business only on the playing fields
provided by the nation's traditional stock exchanges and the brokers who made their livings
there.
But new electronic technologies and Internet-savvy investors, with support from the Securities
and Exchange Commission, are creating alternative markets. The more venturesome exchanges
are trying to win new customers by extending trading hours beyond the traditional 9:30 a.m. to 4
p.m.
On Thursday, the heads of the giant New York and Nasdaq stock markets said they are
reluctantly making plans to extend the time for buying and selling stocks to as late as 10 p.m.
New York Stock Exchange chairman Richard Grasso and Nasdaq chairman Frank Zarb said they
hoped to extend their exchanges' hours in the coming months, though no date has been set. But
they may be playing catch-up: Unlike their online rivals, both will need approval from the
Securities and Exchange Commission, which could take weeks or months, according to
spokesman John Heine.
Industry executives with ties to both markets, interviewed Friday, privately described the NYSE
and Nasdaq posturing as "a game of chicken" or "two schoolkids in a fight they hope the
principal will break up quickly" - the principal being Arthur Levitt, chairman of the Securities
and Exchange Commission.
At least one electronic trading system, Eclipse Trading in New York, is planning to begin
accepting evening trades in July. Morgan Stanley, Salomon Smith Barney and other established
brokerages have promised to help Eclipse "make markets" in listed stocks to ensure that small
investors can complete their trades even after the big exchanges have closed.
Trading volumes may be low initially but will grow over the next 12 months, predicted Fred
Rittereiser, chairman of Ashton Technology Group, a Philadelphia developer of electronic
trading systems. "I think there will be a big market for 6 to 11 o'clock at night a year from now.
We're building systems to adapt to that," he said.
But securities professionals, especially those representing pension and mutual funds and other
institutions, which account for most stock trading volume, predicted that the biggest players
would continue to go home at 4 p.m.
"They're only suggesting this to accommodate a small number of people who want to come
home after work and trade stocks," said Howard Schwartz, chairman of Lynch, Jones & Ryan, a
New York institutional brokerage. "These people should get a life, or learn how to set limit
orders," which automatically execute daytime trades when a stock reaches certain price ranges.
His clients, which include 850 pension plans, have "zero interest" in longer hours, Schwartz
added. "They need to go home at the end of the day. This could be a non-event: If nobody's
buying, who are these people going to do business with?"
Securities and Exchange Commission Chairman Levitt last week echoed these concerns,
cautioning that "before widespread trading begins outside of regular hours . . . a number of
investor-protection and market-integrity issues need to be addressed."
Among those concerns: that investors be told there may be few buyers or sellers in the evening
hours, and that prices could be distorted as a result.
Extended hours are expected to mean higher operating costs and more fees for those brokerages
that concentrate on small Internet investors.
"For the retail shops, it's probably a good thing," said Jeff King, head of Quaker Securities, a
large institutional brokerage in Phoenixville. "But the institutions are only going to work so
many hours. I'm glad I'm close to retirement."
But for many firms, the main effect might be to spread existing trades across a longer day. "We
don't think [longer hours] will have much, if any" effect on overall trading volumes, said
Madeline Hopkins, spokeswoman for Wayne's SunGard Data Systems, which controls Brass
Utility (Brut), an electronic network that processes trades for the Ameritrade and Etrade online
brokerages.
Mutual-fund managers worry that extended hours could confuse investors about the daily value
of their portfolios. Officials at Fidelity Investments, of Boston, and the Vanguard Group, of
Malvern, the nation's largest fund families, said they plan to continue posting net asset values as
of 4 p.m., even if the markets stay open later.
Securities professionals aren't the only ones to question the benefit of longer trading hours.
Even day traders, who have fought hard to win greater market access for small investors, worry
that a longer trading day will, paradoxically, make it tougher for many independent investors,
forcing them to rely again on professionals.
"The positive aspects are, it helps cut the fat, it helps eliminate the middleman, and
computerizes everything. And it opens up to the world, quite possibly, to a wider group of
people," said Jeff Cooper, cofounder of the Tradehard.com Web site and author of Hit and Run
Trading, a short-term investing guide.
"But what am I supposed to do? Put my wife on the night shift? Even Michael Jordan can't play
a straight four quarters," Cooper added.
"I think it's going to be a horrible thing. You'll have limited participants, spreads [between buy
and sell orders] will grow, and nobody is going to want to take the risk," added Mark Seleznov,
a Wynnefield native who is managing partner of Trendtrade.com, a California haven for
hundreds of day traders.
According to Seleznov, West Coast brokerages such as Jeffries & Co. attempted to make
off-hours trading available in the 1980s, but found few takers. Seleznov blamed the current
day-trading push on big Wall Street firms, which own many of the emerging computer trading
systems and networks, and which, he said, "want to get rid of" professional day traders like his
clients.
Staloff says international currency markets provide a model for how extended or 24-hour
trading will likely function.
On the all-day, all-night currency options floor Staloff helped start at the Philadelphia Stock
Exchange, purchase and sale prices come closest at times when daylight trading hours in the
United States overlap with those of potential trading partners in Europe or Asia.
During those hours, there are more people looking to trade dollars for euros or yen, and buyers
and sellers have enough potential partners that a relatively firm price can be established and
reported.
But during off-peak hours, "bids drop, offers rise, and spreads widen," Staloff noted. At such
times, "all that's left are the professionals," who can dictate prices to the few customers
desperate enough to need to buy or sell at off-peak hours, he said.
Market operators also are worried whether the nation's patchwork of busy trading systems can
handle increased hours.
"A rush into extended hours is absurd," said Meyer "Sandy" Frucher, chairman of the
Philadelphia Stock Exchange. "It would be chaotic. The infrastructure is not in place for
anyone."
Staff writer Miriam Hill contributed to this report. |
