Wall Street Journal (See Bold)
September 22, 1999
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Trading Firms Step Up Push
To Offer Stocks Night and Day
By REBECCA BUCKMAN
Staff Reporter of THE WALL STREET JOURNAL
Insomniac investors, take heart: You may soon be able to trade stocks virtually all night long.
Island ECN Inc., an alternative-trading network that already is open for business from 8 a.m. to 8 p.m. Eastern time, could push up its opening time to midnight-creating a 20-hour trading day running from 12 a.m. to 8 p.m. The company could turn on the switch in as soon as three months, said Edward J. Nicoll, president and chief operating officer of Island's Iselin, N.J., parent company, Datek Online Holdings Inc.
Nasdaq Accelerates the Race to Provide Extended Trading (Aug. 30)
Datek Is Latest Firm to Push Back Closing Time for Online Trading (Aug. 3)
How the Stock Market Would Be Transformed by a 10 p.m. Close (May 20)
Mr. Nicoll made his prediction during a speech at an industry conference in New York. He also said Island eventually could extend operations from midnight to 10 p.m., thus shutting down just two hours a night to give its trade-clearing systems a rest. The extended hours would allow international investors to place buy and sell orders on the network, he added, and accommodate U.S. investors who want to trade at all hours.
Island's president, Matt Andresen, said later in an interview that there are "no specific plans" to push up trading hours right now, though Island constantly monitors its extended-hours trading volumes and has already lengthened its trading day once. It would likely add to the trading day if its broker-customers demanded it.
Island is one of several electronic-trading systems that in recent months has rapidly expanded trading hours, even though some critics contend that after-hours trading poses risks to investors. Because after-hours volume remains tiny compared with the hundreds of millions of shares traded during the day, the concern is that investors might not always get the best price for their trades.
Join the Discussion: What are the risks and rewards of trading stocks outside of normal market hours?
Still, electronic-trading systems figure that volume could grow rapidly because some investors don't have time to place orders during the day. Just Tuesday, the same day Mr. Nicoll unveiled Island's plans, online broker Ameritrade Holding Corp. said it would link up with four different networks, including the Chicago Stock Exchange, to offer its customers extended-hours this fall.
Ameritrade, of Omaha, Neb., said it was establishing electronic connections with the Chicago exchange; Island; MarketXT Inc., another "electronic communications network" that already offers extended-hours trading on its own; and Knight Securities Inc., a big Nasdaq Stock Market market-making firm.
Unlike some online brokers that have picked one "electronic-communications network," or ECN, with which to do business, Ameritrade decided to spread its orders around. "From our perspective, touching on each of these providers really affords our customers potentially the best opportunity for the best execution," said Kurt Halvorson, president of Ameritrade's trade-clearing subsidiary.
If one network didn't have a lot of liquidity or offer a good price for a particular stock, an investor could simply do the trade elsewhere, Mr. Halvorson said. In addition, some of Ameritrade's partners only do after-hours business in a limited group of stocks: MarketXT trades 200 stocks in a 6 p.m.-to-8 p.m. session, while the Chicago exchange hopes to trade 250 to 300 of the most liquid New York Stock Exchange and Nasdaq issues.
Essentially, Ameritrade's move shows that trading over alternative networks is still in its infancy, and securities firms don't really know which networks will wind up with the most volume, or survive at all. "The sense is that the ECNs are here to stay, [but] I'm not quite sure who the winners will be," said Tom Lewis, Ameritrade's co-chief executive.
Separately, the Chicago Stock Exchange said its extended-hours program, originally set to begin Oct. 1, has been delayed by a regulatory snag. Because it had to file its plan with the U.S. Securities and Exchange Commission under standard procedures, instead of as a special pilot program, the exchange isn't sure when it will kick off the program, a spokeswoman said. The earliest date would be mid-October, she said.
The exchange also said it was pushing back the proposed start time of its extended-hours session to 4:30 p.m. Eastern time from 4 p.m. The regular hours for the Big Board and Nasdaq are 9:30 a.m. to 4 p.m.
For providers already trafficking in stocks during off hours, volume remains relatively light. Though Island said it traded 1.1 million shares in one short, 1 1/4-hour session earlier this month (Island began extended hours trading during the summer with a 4 p.m. to 5:15 p.m. session), MarketXT traded just 7,525 shares of its 10 most-active stocks one day this week, according to information supplied by MarketXT to TheStreet.com Inc., a Web financial-news service.
The least active of those 10, Sun Microsystems Inc., traded just 100 shares. So, if each of MarketXT's other 190 stocks traded 100 shares apiece, total volume would still be shy of 27,000 shares a day. A MarketXT spokeswoman declined to comment on the trading volumes.
Volumes could get a lift with the entrance of Knight Securities, part of Knight/Trimark Group Inc., onto the extended-hours scene. Ameritrade said Knight should begin routing orders to various ECNs outside regular market hours by Oct. 1. Knight/Trimark's president and chief executive, Kenneth Pasternak, said he wasn't ready to discuss details of the program, but that Knight already has links with ECNs and "we intend to extend that to after hours."
Knight would like to test extended-hours trading with just a few brokerage firms, Mr. Pasternak said. "Then certainly, we'd open up that capability to a larger universe of customers at some point in time." At first, Knight would serve only as a transaction agent for these trades, but the firm is expected eventually to commit its own capital to trades, as it does when it functions as a traditional market maker.
Write to Rebecca Buckman at rebecca.buckman@wsj.com
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