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Markets & Stocks
Nasdaq readies evening shift
May 27, 1999: 8:17 p.m. ET

Exchange's parent board votes to prepare for trading as late as 10 p.m.
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NEW YORK (CNNfn) - The board of Nasdaq's parent organization approved steps Thursday to extend the electronic trading system's hours into an evening session.
     But it offered a truce with its biggest competitor, inviting the New York Stock Exchange to link up in an effort to make sure any move to longer hours happens with proper protection for investors.
     That may provide a temporary finish line in an escalating race to see who can offer longer hours first.
     Meeting in New York, the board members of the National Association of Securities Dealers Inc. voted to prepare for extended hours on its subsidiary Nasdaq, the second-largest U.S. market after the NYSE.
     "There will be extended hours," NASD Chairman and CEO Frank Zarb said after the board meeting. But the details of how that will work are largely undecided even after the vote. Hashing them out will likely take "several months," Zarb said.
     There is some support to wait until after Y2K comes and goes before extending hours.
    
Open 'till 10

     Nasdaq's evening session most likely would run from 5:30 p.m. ET to 9 p.m. or 10 p.m., the NASD board said Thursday. That would allow for a break after the day session, which now runs 9:30 a.m. ET to 4 p.m. ET.
     Only the 100-largest Nasdaq stocks would trade in the evening session at first. Stocks with splits or dividends that day wouldn't trade in the evening session. The NASD's vote gives the go-ahead to pin all the details down.
     The push to longer hours is coming from individual, or retail, investors who want to trade their own stock at night. "There are retail investors who want the opportunity to trade stocks in a different time frame," Zarb said.
     Zarb explained that half of American households are now in the stock market. Over the next few years, that proportion will grow to 60 percent to 75 percent, he said, bringing "a completely different dynamic" to the market.
     Many individual investors want to trade in their time off from work. Soon they will be able to do so, Thursday's announcement confirmed.
     The securities industry realizes longer hours to serve that demand are inevitable. But many in it worry an evening session would be too illiquid and volatile and investors would trade without proper information, advice, or even prices.
     Zarb tried to quiet some of those concerns Thursday, urging for cooperation in the securities industry to resolve those issues. The industry needs to do the right thing, look out for investors, he said, "to be responsible and to move in unison."
     He cautioned Nasdaq would not allow competitors to offer longer hours before it did. "If someone hot dogs it and goes ahead and does it, we'll have to go forward."
     Nasdaq had already announced it was ready to introduce longer hours at some point this year. But NYSE Chairman and CEO Richard Grasso said Monday the Big Board was ready to go ahead with extended hours as early as July.
    
Burning the midnight oil

     The NASD board vote follows a vote by New York Stock Exchange members Wednesday in favor of extending hours on the Big Board.
     All but two of the more than 300 members at the meeting voted to proceed with longer hours. The NYSE board meets next Thursday, June 3, and may vote on longer hours then.
     "I think that longer hours are inevitable," Michael LaBranche, senior managing director of NYSE member and specialist firm LaBranche & Co. said Thursday. "We're just responding to some competition really, potential competition from Nasdaq."
     Zarb was cautionary in his tone, matching a now more recalcitrant Grasso. "Our original timetable was the summer of 2000. Our readiness is going to be the summer of 1999. The choice we will make will be driven by competition," Grasso said Thursday in a speech in Vancouver ahead of the NASD vote.
     The NYSE might introduce both a late session from 5:30 p.m. ET to 10:30 p.m. ET and an early session from 5 a.m. to 9 a.m.
     Other securities-industry insiders said a July timetable is unfeasible for the NYSE, given that any change to trading hours requires a public comment period and approval from the Securities and Exchange Commission.
     Thursday the NASD both laid ground rules for a drive forward to a Nasdaq night session, while Zarb took his foot off the gas. "Piecemeal implementation of extended hours would be detrimental," he said in a release.
     He said extended trading should start only with the protections investors have during regular trading hours.
     Though the two markets are now inching hand in hand toward longer hours, one eye on each other, neither has submitted an official proposal to the SEC.
     Both have held informal discussions with the commission. The public comment period on any proposal would extend up to 90 days.
     Zarb said Nasdaq wants to work with all aspects of the securities industry to make sure hours are extended the right way. "This is all about investors," he said.
     The NASD called for "a joint industry-wide effort," saying "a full, responsible and coordinated effort will take some time."
     Kenny Pasternak, President and CEO of Nasdaq market maker the Knight/Trimark Group Inc., said he agrees with the approach of starting evening trading slowly at first.
     "We think it should be done in a pilot," he said. "I have concerns. I'm not pessimistic they can't be overcome."
     He said Nasdaq's participation in extended trading would solve several of the quibbles he has.
     From an academic point of view, he said, a market needs four things: strong regulatory oversight, strong pricing information, resilient technology and good liquidity.
     The participation of a major market such as Nasdaq in night trading clears all but the liquidity issue, he said.
     NASD's board said participation by market makers in any evening session would be voluntary. Pasternak said guarantees of liquidity would be an encouraging step.
     "Some investors might trade in very active stocks and see what happens," he said. Evening trading is certainly "a sexy idea" and inevitable, he agreed, particularly for amateur, or at least noninstitutional, stock traders.
     But even though 20 percent to 30 percent of all limit-order trades are now placed after the close of markets at 4 p.m., there's no guarantee that volume would transfer to an evening session, he said. "If they didn't have a lot of faith in that market, they probably would trade on a very limited basis."Back to top
     -- by staff writer Alex Frew McMillan with additional information from wire reports.

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.