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NYSE to extend session
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May 24, 1999: 5:36 p.m. ET
Chairman says Big Board could begin evening trading hours this summer
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NEW YORK (CNNfn) - Faced with booming demand for stock trades and increasing competition from electronic trading systems, the New York Stock Exchange may add an evening trading session beginning in July.
Such a move, if approved by the NYSE's board of directors and the Securities and Exchange Commission, would accelerate the Big Board's plans to extend its trading day by about a year.
It would also allow the NYSE, the world's largest stock exchange, to have a larger say in how securities are traded after traditional markets have closed.
The exchange plans to begin the evening session between 5 p.m. and 6 p.m. ET, with trading closing at 10 p.m. NYSE trading now runs from 9:30 a.m. to 4 p.m.
"A large percentage of orders are entered in the hours after our close through about 10 p.m. EST," said Richard Grasso, NYSE chairman. "The question becomes: Are those consumers interested in having those orders executed" during those hours, instead of waiting for the open of trading the next day?
Grasso told CNNfn that the extended hours would employ the NYSE's familiar floor-based, open-outcry auction system.
Volatilty a concern
Among the key challenges new NYSE hours would face are which stocks would be available for trade and volatility issues.
"There are a lot of key questions to answer before we can complete this transaction," Grasso said. "It's quite right to point out that companies that trade actively during the conventional session may trade with much less liquidity in off hours." (174K WAV) or (174K AIFF)
Grasso said a possible solution would be to limit the securities available for off-hours trade to the most liquid issues.
Currently stocks trade after hours on electronic trading systems such as Instinet. However, the volume is often only a fraction of what normally trades during the day, leading some experts to wonder if price movements would be exaggerated during the after-hours sessions.
However, Michael Holland, chairman of Holland & Co. said an extended trading day could actually end up brining more stability to the market.
"Rather than more volatiilty, I think it can make a case for more stability," he said. "I think that you end up with a wider open outcry situation."
Grasso said he believes the SEC would want the NYSE to offer after-hours trading as quickly as possible.
Competition heats up
Earlier this year, Grasso said he hoped to have the NYSE ready to offer an early-morning session, as well as a late-evening session, by fall 2000.
However, the emergence of electronic communications networks (ECNs) has forced the NYSE's hand.
"There are going to be participants in off-hours trading," Grasso said. "Several of the new ECNs are going to offer services to investors this summer, and as you might expect … the New York Stock Exchange has a responsibility to its consumers to look very carefully whether we want to offer those same services as early as July of this year."
The push to extend the trading day comes as demand for stocks shows no signs of slowing down, thanks in large part to the emergence of online trading firms such as Charles Schwab and Ameritrade.
The Dow has staged an impressive rally
Over the last few years, trading volume on the New York Stock Exchange has skyrockted, and the Dow Jones industrial average has almost doubled, creating a feeling of enormous paper wealth for millions of investors.
In offices around the country, workers who used to spend time chatting about their favorite sports teams or what was on television the night before are now monitoring their portfolios on the Internet.
Investors like after-hours trades
Although off-hours trading represents only a fraction of the volume during a regular trading session, a CNNfn.com poll showed that investors would welcome the opportunity to trade stocks on the NYSE during an evening session.
More than 60 percent of about 2,400 respondents expressed interest in trading stocks on the Big Board after the regular session.
However, just slightly more than half of those who answered the poll said they were interested in an early-morning session. Investors also responded coolly to the idea of 24-hour NYSE trading, with nearly half of those polled indicating they believe all-day trading on the Big Board wouldn't be a wise choice.
NYSE to go electronic?
NYSE officials have also mulled the possibility of creating its own ECN. They've also been in talks with various ECNs about creating a "Super ECN" that would allow those networks to share system resources and pool their liquidity.
The NYSE will determine whether to allow traders to trade stocks listed on the Nasdaq - the NYSE's main U.S. rival - via such an electronic-trading system by this summer.
Providing after-hours trading in both the traditional auction and electronic formats would solidify the NYSE's position among investors.
An Instinet spokesman said the company is in negotiations with the NYSE regarding a large-scale ECN but declined to provide further details. Officials from Island ECN, another major electronic-trading system, weren't available for immediate comment.
Grasso also is pushing to do away with a fraction-based quotation system for stocks, replacing it with a decimal-based system "to make them more competitive in the global arena." 
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