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Strategies & Market Trends : The Final Frontier - Online Remote Trading -- Ignore unavailable to you. Want to Upgrade?

To: TFF who wrote (7503)	6/21/1999 5:59:00 PM
From: TFF	Read Replies (4) \| Respond to of 12617

SEC won't block private night trading By Bloomberg News Special to CNET News.com June 21, 1999, 1:30 p.m. PT WASHINGTON--The Securities and Exchange Commission said it won't try to discourage private electronic networks such as Eclipse Trading from introducing night stock trading to individual investors but will carefully monitor their operations. As Eclipse goes forward with night trading as early as July, the SEC will try to develop an industrywide approach to concerns created by evening trading, such as how to protect investors from the likelihood of increased stock volatility, SEC spokesman Chris Ullman said. "We have no intention of stopping the electronic networks," Ullman said. "But we're going to have an ongoing, informal dialogue with them to resolve any issues that surface." New York-based Eclipse, which was founded by two former SEC enforcement lawyers, said it plans to start offering after-hours trading in July or August. Two other companies, Wit Capital and Datek Online Holdings, said they intend to do so by early next year. The SEC staff hasn't yet decided whether it will try to develop an industrywide consensus through a conference or through more informal coordination among securities industry professionals, Ullman said. No date has been set for these efforts, he said. Eclipse welcomed the SEC's statement. "We have every intention of moving in a conservative and prudent way," said Eclipse president Michael Satow, a former SEC enforcement lawyer in New York. "If an SEC conference produces a consensus that's different from the way we're operating, we intend to make the necessary changes." Morgan Stanley Dean Witter and Citigroup's Salomon Smith Barney brokerage have agreed to invest in Eclipse. Several brokerages, including Herzog Heine Geduld and Bernard L. Madoff Investment Securities, have agreed to participate in its system. Ullman's comments sought to clear up confusion about how the agency would oversee the introduction of night trading for individual investors, which has stirred controversy among the New York Stock Exchange, National Association of Securities Dealers, and many brokerages. Securities lawyers say that, though the SEC has no legal authority to stop electronic networks from offering night trading, it could use its bully pulpit to pressure them to do so. Moves toward night trading by private electronic networks are increasing pressure on the NASD's Nasdaq Stock Market and the NYSE to meet the competition by also offering after-hours trading. The NYSE and the NASD both have urged a cautious, measured approach to after-hours trading. NASD Chairman Frank Zarb last month appealed in vain to the electronic networks to postpone their night-trading plans until an industry-wide approach could be developed. An advocate for small brokerages said the SEC should have tried to slow plans by the private networks, arguing that small firms would be disadvantaged if night trading goes forward before an industry consensus is developed. ''This is like the Korean War, where the battle for Pork Chop Hill takes place while negotiations are going on,'' said NASD board member Alan Davidson, president of Zeus Securities in Jericho, New York. ''Whoever captures Pork Chop Hill is in a stronger position to negotiate.'' Small firms with staffs too small to handle after-hours trades could be forced to merge with other brokerages after Eclipse begins trading, Davidson said. The SEC should have asked the private networks to postpone their plans, he said. Currently, U.S. markets are open for regular trading by individual investors from 9:30 a.m. to 4 p.m. New York time. The NASD board last month discussed extending those hours so trading could occur between 5:30 p.m. and 9 or 10 p.m. New York time. Institutional investors such as pension and mutual funds already can trade at night through electronic networks such as Reuters Group Plc's Instinet. SEC chairman Arthur Levitt has expressed concern that investors who trade at night could be exposed to greater stock volatility, less liquidity and wider spreads between the buying and selling prices. The SEC's staff plans to try to develop a consensus on these investor protection issues, as well as how trades would be cleared and settled, and on ''market conventions'' such as when companies would announce news, Ullman said. One proposal the SEC wants considered is having electronic networks or stock markets produce a box that pops up any time an individual investor is about to trade at night, Ullman said. This box would caution investors that stocks may be more volatile, and that trading might be less liquid. The box also could advise investors to consider placing a ''limit order'' at a specified price, which would protect them from volatility, he said. Eclipse's Satow said he is considering ways to minimize adverse impacts on small brokerages, like having their customers place after-hours trades through the brokerages' clearing firms. Clearing firms such as Bear Stearns Cos. process stock trades for small brokerages. His discussions with clearing firms about this possibility has yielded ''a mixed reaction,'' Satow said. The NASD has said it could offer night trading as early as September but prefers to follow a consensus developed by the industry. The NYSE voted earlier this month to postpone night trading until the second half of next year at the earliest, so that industry computers can adapt to Year 2000 glitches and the planned conversion to quoting stocks in dollars and cents rather than fractions of a dollar. Copyright 1999,Bloomberg L.P. All Rights Reserved