|
Fidelity, DLJ extend hours
|
 |
October 7, 1999: 2:32 p.m. ET
Online brokerages will offer trading through REDIBook, round out top tier
|
NEW YORK (CNNfn) - Online brokers Fidelity and DLJDirect both announced Thursday that they will start offering their customers after-hours trading through the electronic communications network REDIBook.
The two companies are finalizing their 25 percent ownership stakes in REDIBook, an ECN currently owned and operated by market maker company Spear Leeds & Kellogg. Discount broker Charles Schwab, which announced Oct. 4 that it would offer extended-hours trading from 4:30 p.m. to 7 p.m. ET for its online customers, will be the fourth partner in REDIBook.
Fidelity Investments, the broker's privately owned parent company, will extend its trading hours online for retail and some institutional clients from 4:30 p.m. ET to 8 p.m. ET, starting in early November. DLJDirect, started by the investment bank Donaldson Lufkin & Jenrette, said it anticipates a pre-hours session from 8 a.m. to 9:15 a.m. and an evening session from 4:15 p.m. to 7 p.m.
The announcements mean all the largest online brokers now will offer extended-hours trading of some kind. The online brokers say consumer demand is strong for extended-hours trading, though analysts say the numbers on participation are inconclusive. Analysts expect to have a better picture of how extended-hours trading has caught on after the end of the year.
Online brokers tend to migrate toward offering similar services. Many have dangled the carrot of extended-hours trading in their marketing since Datek Online first started offering retail customers the chance to trade outside the trading hours of the traditional stock markets, which are open from 9:30 a.m. to 4 p.m.
Issues remain
Fidelity and DLJDirect obviously decided they needed to offer extended-hours trading, said Tim Klein, an analyst at U.S. Bancorp Piper Jaffray, though questions about access to information and the quality of trading outside normal hours remain to be resolved.
"They kind of decided that maybe this is a party they should attend as well," Klein said. "Critical mass has been established here."
He said his impression was that after-hours trading has yet to prove itself or truly catch on with the majority of investors. "People are just taking practice swings," he said.
Fidelity will require its customers to trade in round lots of 100 shares after-hours. It will limit trading to certain stocks, and will publish information on its Web site about the issues involved in trading in the after-hours market and on ECNs such as REDIBook.
"After-hours trading is a service that is of great interest to our involved, active traders," Tracey Curvey, Fidelity Online Brokerage executive vice president, said. She said Fidelity was pleased to offer after-hours trading so soon after Fidelity overhauled its Web brokerage and rebranded it under the name Powerstreet, which offers personalized pages and the like.
DLJDirect also will publish a primer on extended-hours trading via its Web site. DLJDirect CEO Blake Darcy said the combination of REDIBook's heavyweight partners "is a significant step in providing DLJDirect clients with access to the greatest liquidity available in the after-hours market today."
Agreement to link
REDIBook has signed a memorandum of intent with eight other ECNs and the ECN-like trading system MarketXT in which they agree to link their after-hours trading to improve its quality and share quote information. At the moment, each ECN operates independently once Nasdaq closes, so a customer trading via a broker using one ECN isn't guaranteed to get the best price if it's offered on a different ECN.
Pricing is not as good it could be after hours, said Dan Burke, online brokerage analyst at Gomez Advisors, and large price swings are not uncommon. "But that will change," he said, as more people trade after hours. "It's like pushing a boulder uphill. It's going to take time to build it." Customers can place limit orders only after hours, which helps protect them against price swings to some degree.
Fidelity had 2.79 million accounts at the end of June, which ranks it second after Charles Schwab's 2.8 million accounts according to U.S. Bancorp Piper Jaffray. DLJDirect is the sixth-largest brokerage, with 277,000 active accounts.
In terms of volume, Fidelity ranks fifth after Charles Schwab, E*Trade, TD Waterhouse and Datek Online. DLJDirect ranks seventh, with Ameritrade ahead of it in trading volume.
Extended-hours trading raises problems as to when and how companies release earnings information, among other issues, said U.S. Bancorp Piper Jaffray e-commerce analyst Tom Carter. Companies often wait until the end of normal trading hours to release earnings or other corporate news.
But that no longer has the effect of ensuring equal access when investors are able to trade on the information, with extended-hours trading already a reality and the main stock markets considering extending hours.
Still, institutional investors have already been able to trade outside normal market hours, Carter pointed out, so extending hours actually does democratize access to trading, he said. He watched Yahoo!'s stock trade up from 181 through 190 Wednesday night after hours on its positive earnings announcement.
"The person who owned Yahoo! and wanted to buy more yesterday could do something they couldn't do a year ago," he pointed out.
Even so, extended-hours trading is attractive primarily to active traders, he said. "Mainstream, long term investors who are on a path to retirement should not be listening to the noise," he said.
|
|
|
|
|
 |
|
