Just found this story posted on another thread. Contains a few facts about inter-company relationships that I didn't know before. Maybe some of you will be interested.
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NEW YORK (AP) -- The light breeze that's blowing after-hours stock
trading into the mainstream may reach gale force with a gust from
America Online.
Starting in November, a new electronic trading system will enable AOL's
17 million members to participate in the volatile dealings that take place
when traditional markets like the New York Stock Exchange are closed.
AOL's decision to link with Wit Capital's trading network, announced
Thursday, comes just days after the broker Datek launched a short
after-hours session.
Wit, a pioneering online investment firm that's part-owned by Goldman
Sachs, will also provide stock quotes and other information for the new
AOL service under an exclusive six-month deal.
Until recently, the after-hours market had been an exclusive affair,
off-limits to anyone but major institutional players managing huge sums of
money.
Most of the trading is conducted on the Instinet electronic market, which
is owned by Reuters. But now, several rival systems have sprouted up
with the intention of providing off-hours access for the common investor.
Datek's after-hours session runs only for about an hour after the regular
close of trading, but most of the new systems plan to offer an evening
session lasting two or three hours.
The privilege of joining the after-hours club may come with pitfalls,
however, since most of these new markets will be thinly traded at first.
Without sufficient demand from buyers and sellers, only the most popular
stocks will usually be available for trading, and even then, share prices
may swing wildly.
As protection, most of the new after-hours systems require people to
name a specific price they're willing to pay or receive for a given stock.
AOL's announcement on Thursday could serve as a big first step toward
helping resolve the problem of thin trading.
Drawing nearly 10 million visitors per month, AOL's ''Personal Finance
Channel'' is not only one of the most popular destinations within the AOL
network, but possibly the most popular financial site on the entire
Internet.
''AOL has this significant pool of people who are involved in personal
finance and investing online,'' said Frank Lallos, an industry analyst at
Gomez Advisors in Concord, Mass., adding that ''AOL consumers
spend a lot of time transacting business,'' including online shopping and
online trading.
But, he cautioned, ''it's not clear that after hours trading is the panacea
that everyone expects it to be. There are a lot of issues.
''There's a limited number of stocks that we're really talking about. And
even companies like Intel, Microsoft and Dell that trade tens of millions
of shares a day aren't likely to have same liquidity after hours. As a result,
you're likely to see large price swings.
Investors also may not get the best prices quoted on bigger markets like
Instinet.
Like Wit Capital, several of the new after-hours systems boast major
partners, all of them trying to get in on the ground floor of a new market
they hope will be as explosive as online trading.
Goldman also owns a stake in a trading network named Archipelago,
along with J.P. Morgan and ETrade. Last month, brokerages Fidelity
Investments, Charles Schwab, and Donaldson, Lufkin & Jenrette formed
a joint venture with Spear, Leeds & Kellogg to create a new electronic
market.
Datek's after-hours trading is conducted by its Island ECN subsidiary,
which is partly owned by Waterhouse Investor Services.
All the impending competition has prompted the NYSE and the Nasdaq
Stock Market to announce that they'll introduce their after-hours trading
sessions sometime next year.>>
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