thank you, osman. i'm presently doing my DD as well.
NITE briefly cited in this piece from yesterday's washington post. on after-hours trading, pasternak says, "Within six months, people are going to be able to go home after work and buy and sell stocks. It's just like eBay. If there's a buyer and seller, let's make a deal, baby."
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Shorter Odds on Longer Hours
Momentum Grows for Evening Trading on Stock Exchanges
By Jeanne Dugan
Washington Post Staff Writer
Thursday, April 22, 1999; Page E01
NEW YORK, April 21—-To get a glimpse of why the New York Stock Exchange will soon extend its hours, walk to an unmarked building next to the teeming trading mecca and ride the elevator to the basement.
Here, at the headquarters of a trading company called Island, no one is shouting orders. The only sounds are the low hum of modems and a Compaq computer server ominously named Monster 101. Only 20 people work here -- mainly twentysomethings who come and go in jeans and T-shirts.
Yet this is where 15 percent to 20 percent of all orders for Intel, Dell, Microsoft and Amazon.com change hands every day. And, under a new policy instituted today by the Securities and Exchange Commission, Island and dozens of other "electronic communications networks" will be allowed to apply to become full-fledged stock exchanges.
"We are already competing with Nasdaq, and we plan to go head to head with the New York Stock Exchange," said Matthew Andresen, the 28-year-old president of Island, a subsidiary of Datek Online Holdings. "Not that long from now, people are going to be able to use our system to trade 24 hours a day."
The growing sport of trading stocks from home -- a key force in propelling the Nasdaq composite index and the Dow Jones industrial average to new records today -- has spurred a movement to extend trading hours, ultimately around the clock. The idea is to allow a swelling army of individual investors to trade outside normal market hours, when most corporations make announcements but now only a handful of institutional investors can profit from the news.
"The bull market has created all this excitement around trading -- and there's no doubt in anybody's mind that you're going to have extended hours," said Bernard L. Madoff, an active dealer in stocks. "It's just a matter of when it's going to take place."
The New York Stock Exchange plans by mid-2000 to open at 5 in the morning and close between 9 p.m. and midnight, a spokesman said. He would not verify rampant rumors in the brokerage community that the NYSE will roll back its opening 30 minutes, to 9 a.m., in June and add a half-hour to the close in September, but he said: "We are talking to our constituents -- and if they want us to extend our hours sooner, we will do that."
Nasdaq expects to add a four-hour evening session as early as this summer -- either from 5 to 9 or from 6 to 10. The exchange hopes that will alleviate a crush of orders that floods in during the first 10 minutes of trading. Currently, many online brokers receive as many as 25 percent of their orders at night, leading to a logjam at the opening bell.
"There is a powerful demand from investors who want to research stocks when they get home," NASD President Richard Ketchum said. The new session, he said, would accommodate not only individual investors but also brokers on the West Coast.
Major securities firms already trade stocks after the market closes, largely through a computerized system called Instinet, a subsidiary of Reuters, or on exchanges in Tokyo and London. Previous plans to extend U.S. stock trading to small investors have failed, because trading was expensive and there were so few orders that prices varied widely. West Coast investors also balked at coming to work before sunrise.
But technology is radically changing the way securities are traded, driven by new electronic trading networks that match buyers and sellers directly. These networks control a third of Nasdaq's volume, and they are now plotting low-cost ways to process small orders after the market closes. But these moves also raise concerns, such as whether trading will be orderly, whether current securities rules will be followed, who will monitor trades, and even whether traders and regulators will get enough sleep.
J. Perry Fectau is exactly the kind of candidate ripe for extended hours. Every night after arriving at his Stamford, Conn., home, the technology consultant researches stocks, scans message boards online, reviews news and places orders that will be filled the next morning.
"This alone takes up about one to three hours of my time each evening," he said. "Add trading to that and you've got a recipe for seclusion. This might have the effect of turning me into a night trader, as I watch stocks less frequently during the workday."
The race to become the electronic spot to match buy and sell orders began late last year, when the SEC said it would consider granting stock-exchange status to alternative trading networks. Nine start-ups have indicated that they will apply. They are negotiating with brokerages, including E-Trade and Charles Schwab, that are seeking to give customers round-the-clock trading.
"Within six months, people are going to be able to go home after work and buy and sell stocks," said Kenneth Pasternak, chief executive of Knight/Trimark Group Inc., one of several brokerages preparing to offer night trading to small investors.
"It's just like eBay," he said of the popular online auction system. "If there's a buyer and seller, let's make a deal, baby."
Richard Grasso, president of NYSE, said: "Consider the millions of Americans who own stock but can't participate because they're at work. The teachers, journalists, bus drivers, carpenters. Hopefully, now they'll all participate."
But the prospect is full of potential problems. Stocks swing more wildly when fewer people are buying and selling. And fewer people are bound to be trading in the middle of the night.
"Someone could buy a stock, it could be affected by news and they could be stuck with it as it plunges," said Bill Burnham, technology analyst at Credit Suisse First Boston Burnham.
Securities dealers are worried about having to monitor stocks around the clock. "It's already hard enough to find traders," lamented John Herzog of Herzog, Heine, Geduld. "We're going to need three shifts."
Some corporate investment relations managers are concerned about distributing news. And social researchers worry about the effects on an already stock-obsessed and sleep-deprived public.
"Will people be able to sleep when they know their stock holdings are moving around?" said Werner de Bondt, a professor of behavioral finance at the University of Wisconsin. "And, if they stay up to trade stocks, their judgment could become skewed. When police are interrogating people, remember, one of their best tools is depriving them of sleep."
The most profound potential problem is a splintered market in which buyers and sellers never find one another. "If there's no one on the other side of a trade, it will be like selling a car in Amish country," said Andresen, president of Island.
Island has grown in a year from handling 1 billion shares in a quarter to 5.5 billion shares worth $342 billion. "If we can compete with Nasdaq during the day," Andresen said, "what's to stop us at night?"
Burnham believes that an exchange needs 50,000 trades a night in order to maintain a "critical mass" to assure safe and efficient trading. The most ripe contender, then, would be Island.
Among Island's rivals are Archipelago, which gained recognition recently when Goldman Sachs and E-Trade each invested $25 million to buy a joint 50 percent stake. Wit Capital recently said it would offer shares to the public, in advance of the launch of its after-hours network.
Eclipse Trading, developed by two former SEC enforcement lawyers, plans a summer launch of its after-hours trading system, called IndivEX. It's slogan: "The market's still open."
Eclipse has already secured deals to handle after-hours trades for two major firms -- Madoff and Morgan Stanley Dean Witter's Discover Brokerage unit.
Investors will "be able to take advantage of late breaking news and corporate announcements when they're made," according to Eclipse's Web site. "So, why wait until tomorrow when you're ready to trade today?"
Some investors scoff at that notion. "Who's the idiot who is going to be selling a stock that is clearly going to jump in the morning?" said John Schott, an engineer who actively buys and sells stocks on his own. "If it's big news, the small investor is not going to be the first to find out."
Still, such skepticism has not stopped securities executives from being prepared. "You can't underestimate the appetite for stock purchasing," said Pasternak of Knight/Trimark. "What if it's there and you're not?"
"Critics say we're simply pouring the same amount of activity into a longer day," the Big Board's Grasso said. "I'm convinced that this will lead to more business."
Pasternak recently bought a small stake in Brut, an electronic trading network partially owned by Goldman Sachs. He said he plans to extend his hours gradually, until he is convinced that customers are there. Ultimately, he plans to offer 24-hour-a-day trading, seven days a week.
Like many brokers and electronic exchange candidates, he would begin by accepting only "limit orders," which place parameters around the buy and sell price, to avoid getting trapped in wild price swings.
Pasternak had a taste of the new enthusiasm for stock trading the day after Thanksgiving. Usually the slowest day of the year, it was the busiest in his firm's history. "Many online firms I talked to said it was their busiest day, too."
While the pros were off, everyday people who were home from their real jobs engaged in America's popular new hobby. "People had some time off," he said. "So, they decided, 'Let's do a little trading for entertainment.' "
© Copyright 1999 The Washington Post Company
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