NYSE to Delay Start of After-Hours Trading
The New York Stock Exchange decided Thursday to postpone extending its daily trading hours until at least the second half of next year, despite plans by competitors to roll out after-hours trading as early as this summer.
Backpedaling from earlier indications that it would introduce late trading this year, NYSE Chief Executive Richard Grasso said the Big Board would first focus on Y2K upgrades and implementing a new system to quote stock prices in decimals rather than fractions.
“At this juncture, it is clearly inconsistent with protecting the public to launch an off-hours session,” Grasso said.
The after-hours saga--in which NYSE and Nasdaq both spoke of late sessions this summer but later backed off to differing degrees--demonstrates the tremendous unease felt by the established marketplaces.
NYSE and Nasdaq had shown little interest in late trading until upstarts Eclipse Trading Inc. and Wit Capital Corp. unveiled proposals to allow individuals to trade stocks after regular market hours, which are 6:30 a.m. to 1 p.m. Pacific time.
The NYSE and Nasdaq, perceiving unprecedented threats to their business, rushed to say they would match their rivals even though neither had specific plans in place.
The National Assn. of Securities Dealers, which operates Nasdaq, voted last week to add a second daily trading session from 2:30 p.m. Pacific time to either 6 or 7 p.m. But after saying earlier that it could start late trading by September, it backed off last week and refused to specify a start date.
Nasdaq is thought to face a more immediate threat to its business. That stems in part from the nature and history of Nasdaq’s electronic system, as well as from its listing of many hot high-tech and Internet stocks.
In the first quarter, so-called electronic communication networks accounted for at least 20% of the trading volume in Nasdaq-listed stocks, said Bill Burnham, an analyst at Credit Suisse First Boston.
For that reason, Burnham and others think Nasdaq might feel compelled to launch after-hours trading this year.
“They’re closer to the fire than the NYSE is,” Burnham said.
NASD said it wants to coordinate late trading with rivals, but warned that it would “move quickly” if others tried to “preempt an orderly transition.”
Nasdaq refused comment Thursday on the NYSE’s decision to delay, but Eclipse reaffirmed its intent to offer after-hours trading no later than August.
Eclipse and Wit may benefit initially if NYSE and Nasdaq are absent from after-hours trade, but the private companies would eventually falter once the more powerful players get involved, said Dan Weaver, a finance professor at Baruch College in New York.
“Once they start doing it, I think they’ll put the others out of business,” Weaver said.
Nasdaq and NYSE both would need approval from the Securities and Exchange Commission to initiate late-trading sessions. SEC Chairman Arthur Levitt, while supporting after-hours trading, has emphasized that Y2K and decimal pricing are high priorities.
Experts say that opposition from brokerage firms and technological obstacles probably forced the NYSE to put off late trading.
“The policymakers like Grasso and [NASD Chief Executive Frank] Zarb make decisions without checking with the technology people,” Weaver said. “They say they’re going to do it and then they find they can’t do it as quickly as they thought they could.”
Wall Street firms fear the costs of adding new staff for late trading.
“The constituency who said ‘This is just too unpleasant for us’ won out,” said David Whitcomb, a Rutgers University finance professor and head of a high-tech trading firm.
Times staff writer Walter Hamilton discusses the day’s market action regularly on the KFWB(AM 980)-Los Angeles Times Noon Business Hour.
