Short Bus, you're such a fish. Whydoncha ask Kenny Pasternak? Again, here's yet another article w/ no mention of ASTN: "Online Broker Gives Individuals A Taste of After-Hours Trading
By CARRIE LEE
THE WALL STREET JOURNAL INTERACTIVE EDITION
Individuals eagerly anticipating the chance to trade stocks after the regular
close of financial markets in New York -- just like professional money
managers and institutions do -- are getting a sliver of the future while they
await more comprehensive after-hours plans by the major exchanges.
NexTrade, a small retail-oriented electronic
trading network owned by Professional
Investment Management in Clearwater,
Fla., already is offering round-the-clock
trading for investors. Other brokerage firms and trading systems, such as
Eclipse Trading Inc., are also proceeding with plans to offer individuals
after-hours trading soon.
Cracking open the door to the exclusive club a bit more last week and
heralding the arrival of major online firms, Datek Online Holdings Corp. is
now allowing its clients to trade Nasdaq stocks after Wall Street's 4 p.m.
closing bell in a 75-minute extended session on Island ECN. Island ECN,
like NexTrade, is a computerized quasi stock market that brings buyers
and sellers together.
Professionals -- such as traders at brokerage firms, insurance companies,
pension funds and mutual funds -- have long been allowed to trade stocks
with each other through such systems in after-hours sessions that exclude
individuals. But opportunities are just now opening for small investors as
the online trading boom helps spur a push for longer trading hours.
Datek (www.datek.com) is the first popular online brokerage firm to allow
clients to execute orders beyond the 9:30 a.m. to 4 p.m. ET regular
market session. Because after-hours trading is usually volatile, Datek plans
to allow its clients to place only limit orders (orders to buy and sell stock at
a specific price rather than the shifting market price) during Island ECN
extended session.
Island ECN, which handles more than 100 million shares a day, or 6% of
Nasdaq volume, offers trading from 8 a.m. to 5:15 p.m. to 180 subscribing
brokers and other professionals. The firm doesn't offer direct access to
individuals. The decision to allow individuals to participate in after-hours
trading is up to subscribing brokers. Datek is the largest shareholder in
Island ECN, the second-biggest private trading system behind Britain's
Reuters Group PLC's Instinet Corp.
Island, Datek and NexTrade are offering a preview of what's to come as
the New York Stock Exchange, the Nasdaq Stock Market and other
firms work on plans to extend the hours investors can buy and sell stock --
and maybe eventually allow round-the-clock trading. But while Nasdaq
and the Big Board have delayed their timetables for extended trading,
independent electronic trading systems and brokers are forging ahead with
their plans.
"We're technologically ready to go 24 hours any time," says Matthew
Andresen, president of Island ECN. "The issue is investor protection and
education."
Indeed, Cyber investors can trade all day on NexTrade through upstart
online firms such as www.onlinetradinginc.com, www.cybercorp.com and
www.andovertrading.com. NexTrade is the smallest of nine private trading
systems approved by the Securities and Exchange Commission. It handles
about 290,000 shares per day versus more than 100 million for the bigger
systems, such as Island ECN and Instinet. These systems are known as
electronic communications networks, or ECNs.
Despite its relatively small size, Mark Smith, director of strategic relations
for NexTrade, brags that the firm is the first and only ECN to offer
round-the-clock trading to retail investors. "Our desire was to be there first
and bring attention to the after hours trading market," says Mr. Smith.
"Customers want after-hours trading. Brokers aren't prepared to offer it to
them, we are."
But that's changing as major players such as Datek open the doors to
after-hours trading to individuals. More online brokers that subscribe to
Island ECN may follow. At least one company already has jumped
aboard. Track Data Corp. (www.mytrack.com) announced last Friday it
was going to offer extended trading to individuals through Island ECN.
Moreover, online investment bank and brokerage firm, Wit Capital Group
Inc., said it plans to start an evening trading session over an alternative
electronic trading system for individuals later this year.
The drive toward an extended hours -- and possibly widespread
round-the-clock trading -- has prompted a recent rash of alliances
between brokerage firms and ECNs looking to position themselves.
Waterhouse Securities Inc., a unit of TD Waterhouse Group Inc., has
announced it will take a stake in Island ECN. And E*Trade Group Inc.,
Goldman Sachs Group Inc., and J.P. Morgan & Co. have taken stakes in
Chicago-based Archipelago Holdings LLC.
And just last week, Charles Schwab Corp., Fidelity Investments and
Donaldson, Lufkin & Jenrette Inc., which owns the DLJdirect online
broker, announced plans to form an ECN through a joint venture with
Spear, Leeds & Kellogg LP, a New York-based specialist trading firm.
Speer Leeds owns REDIBook, the third largest independent trading
system. Officials in the alliance said they hope to offer an extended session
by the third quarter.
Other firms are expected to bring after-hours trading to ordinary investors
soon. Eclipse Trading plans to offer a 6 p.m. to 8 p.m. session this
summer. Michael Satow, Eclipse's president and founder, says his firm will
probably have a morning session as well. He said Eclipse plans to let
investors trade limit orders only on the 100 biggest issues on the Big Board
and Nasdaq.
Eclipse brokerage affiliates include Discover Brokerage Direct, a unit of
Morgan Stanley Dean Witter; Salomon Smith Barney Inc., a unit of
Citigroup Inc.; and Dreyfus Brokerage Services, an affiliate of Mellon
Bank Corp.
Instinet, which offers virtually round-the-clock trading for professionals,
has expressed interest in partnering with online brokers in order to bring
individuals the same benefits. Instinet is the oldest and largest ECN in the
country, trading 170 million shares per day, about 20% of Nasdaq's
volume, on average. The firm also is planning to form an online brokerage
business called Instinet.com, according to Bloomberg News.
Some individuals are clamoring for after-hours trading because they want
the same advantages professional investors have in making trades when
major company news is announced after markets close. And industry
officials estimate than many individuals place orders after the markets
close. Charles Schwab, for example, says 25% of its customer orders
come in after the close. Currently, most retail orders placed through online
brokers after the close of regular trading are executed the following trading
day.
A longer trading day would theoretically put individuals on the same level
with the professionals in reacting to market-moving news after regular
trading ends. Proponents also say that after-hours trading would be
beneficial for West Coast investors. Because of the time difference, West
Coast investors have to wake up early to start trading or sometimes miss
trades because the markets are closed by lunchtime -- way before they
even finish working. Schwab, for example, says a third of its clients are on
the West Coast.
Meanwhile, the SEC, the major exchanges and industry leaders agreed at
a recent summit to form four committees to look at the issues surrounding
extended trading -- such as the benefits and the risks to individuals. A big
danger for individuals is market liquidity. Because there aren't as many
buyers and sellers trading after markets close, investors could have a
difficult time executing orders or getting good prices. Thin volume also
increases price volatility.
Nevertheless, firms have plans to protect ordinary investors from the
dangers of gyrating prices. Nearly all of the firms considering after-hours
trading for individuals have plans to restricted extended-hours trades to
limit orders, where investors buy or sell a security at a specific price.
Still, an after-hours market requires enough buyers and sellers in the first
place. Mr. Satow of Eclipse acknowledges that liquidity is an issue in the
after hours market, but he says his firm has enlisted the cooperation of
market makers who buy and sell shares. "They'll be putting orders into the
system, there will be bids and asked from day one ... in every stock that
we trade," Mr. Satow says.
Meanwhile, the SEC is taking a wait-and-see approach. "We're in the
gathering information stage," says an agency spokesman. Firms do not
need SEC approval to execute after-hours trades specifically, but they
must get SEC approval to operate as an ECN, and then file additional
forms if they want to change their hours of business.
SEC Chairman Arthur Levitt also has said he would prefer a more
coordinated approach in starting extended-trading sessions, though he
acknowledged that some brokerage firms and ECNs won't wait for the
Nasdaq and the NYSE.
The Big Board has said it won't open for extended trading until at least
2000, waiting until after it deals with computer issues related to the turn of
the century and the market's shift to decimal pricing. Nasdaq could start
offering after-hours trading as soon as September for its 100 largest
stocks, but a spokesman says the exchange isn't committed to that time
frame.
Among online investors, sentiment towards after-hours trading is mixed on
several of the message boards devoted to the subject. On Silicon Investor
(techstocks.com), one participant wrote that the practice "brings in more
inexperienced investors, who will buy at night on hype and will be away
when profit is taken." Another wrote: "I think it's a good idea. In fact
trading should be carried out 24 hours a day." |
