NASDAQ May Be Ready to Join the After-Hours Crowd
Up for a vote: A 5 p.m. to 9 p.m. session for trading up to 500 stocks
Day traders may soon have the chance to become evening traders, too.
Directors of the NASDAQ stock market will vote on Wednesday, May 26, on establishing a 5 p.m. to 9 p.m. (Eastern) trading session for 100 to 500 of NASDAQ's most popular stocks. If it's approved and ratified by the Securities & Exchange Commission, the pilot program will test the popularity of after-hours trading -- and try to position NASDAQ against a surge of competition, as new electronic markets gear up to render the closing bell increasingly meaningless.
At least three new after-hours markets are slated to open by yearend:
--The Island ECN, an electronic communications network owned by Datek Online Holdings, already trades 3% of its volume outside of NASDAQ's 9:30 a.m. to 4 p.m. (Eastern) trading hours. Island expects to make its electronic order-matching system available 24 hours a day to its 150 broker-dealer subscribers "within a couple of months," says President Matthew Andresen.
--Eclipse Trading, an Internet startup, hopes to open its IndivEX market for retail investors sometime this summer. Eclipse says it will enlist at least a dozen broker-dealers to direct after-hours orders into its session, tentatively scheduled for 6 p.m. to 9 p.m. (Eastern).
--Wit Capital Group, an Internet investment bank, hopes to add a 7 p.m. to 10 p.m. session (Eastern) by yearend.
In addition, Instinet Corp., a Reuters Group subsidiary that matches buy and sell orders for pensions, mutual funds, and other big institutions, is considering opening its after-hours market to individual investors.
HUMAN SHORTAGE. Retail demand for after-hours trading could be strong: Eclipse reports that 40% of customer orders to online brokers are placed outside of NASDAQ's market hours. The big problem any after-hours market faces is attracting enough middlemen -- brokers -- to channel those orders into one place. Even Island's corporate sibling, Datek Online Brokerage Services, doesn't let its customers participate in Island's extended hours. A spokesman says "the audience isn't prepared" for the thin markets and volatility that investors are likely to find after hours.
Broker participation could be especially problematic for NASDAQ. Its trading system requires human market-makers to maintain bid and ask prices on each stock that's traded. NASDAQ's member firms may balk at hiring more traders to staff what will probably start out as a low-volume market. That's less of a concern for the E-markets, which match orders via computer.
The Big Board, meanwhile, is headed for another part of the clock: The New York Stock Exchange is pondering an early-morning trading session, from 5 a.m. to 9 a.m. (Eastern), to overlap with Europe's bourses, as well as a 5 p.m. to midnight session. An NYSE spokesman says the target date for both extensions is the summer of 2000, but the move could be accelerated "if demand dictates we move faster." If that's the case, traders will soon be able to swap stocks around the world and around the clock, in a market that never sleeps.
By Mike McNamee in Washington
EDITED BY DOUGLAS HARBRECHT _ _ |
