NASD Plans to Begin Pre-Dawn Trading
Wall Street stock traders will start opening shop much earlier in the day under a new plan announced Friday by the National Assn. of Securities Dealers.
The NASD, a group of leading stockbrokers who operate the NASDAQ over-the-counter market, plans to start trading some over-the-counter shares at 4 a.m. EDT, 5 1/2 hours earlier than the current opening.
The move, due to begin in early 1990, is aimed at luring away some of the potentially lucrative trading done at that time on foreign exchanges, particularly the London stock exchange.
The NASD plans to extend its trading hours on 200 to 300 over-the-counter stocks in early hours.
The list would include actively traded over-the-counter shares such as Apple Computer Inc. and MCI Communications, as well as all 97 European shares listed on NASDAQ, which include Jaguar PLC and Cadbury Schweppes PLC.
“The main reason they are doing this is to compete with exchanges on a global basis. They want to take some of the business away from other foreign exchanges that happen to be trading at those hours, especially London,” said OTC market analyst Jeffrey Adams of Paine Webber Inc.
The NASD said 71 shares are listed currently on both the NASDAQ and the London stock exchange.
“We are doing this to respond to members’ desires to have full NASDAQ services available to their London operations. Currently they have a limited amount of NASD services there and are not trading NASDAQ shares in any meaningful way until the U.S. market is open,” NASD Chairman Joseph Hardiman said.
Washington-based NASD services include items such as stock price information, computer links and surveillance for trading irregularities.
The plan for pre-dawn trading has been approved by the NASD board, and Hardiman said it will file for Securities and Exchange Commission approval within 30 to 60 days.
The move requires approval by member firms who must foot the bill for expanded trading operations. Directors of over-the-counter trading desks of large New York firms that are NASD members said they were studying the proposal and trying to figure out the logistics of staffing their desks at those early hours.
“My idea right now is to just look at the whole idea, evaluate it and see if there is a need for it,” said the director of one trading desk for a large New York-based firm.
“I still find it hard to believe that a customer in Des Moines would call and want to buy 100 shares of MCI at four in the morning,” he said. But he thought that European institutional accounts would most likely be interested in the extended trading hours.
And already the trading chief said he would be heading to London next week to evaluate and make needed technical and staffing adjustments for the transition to earlier hours.
