In recent years, European stock exchanges have continued to expand their trading hours. Now the pendulum seems to be knocking back. The British industry associations Association for Financial Markets in Europe (AFME) and Investment Association (IA) propose a reduction of the London Stock Exchange by 90 minutes.
Instead of 08.00 to 16.30 clock local time, the stock market will open its doors in the future between 09.00 and 16.00 clock.
"Shortening will increase liquidity," argues AFME. "It also gives merchants and investors more time to digest corporate communications." Trader Mark Taylor from broker Mirabaud agrees with this assessment. "We all come in before the stock market opening," he says. "An extra hour of preparation would equalize the hitherto feverish search and processing of the important news."
According to one stock trader, the plans could pave the way for more women to work because they would allow more family-friendly office hours. "Our working day is eleven hours long and not eight as official," she explains. Despite the discussion about greater diversity since 2005, the number of women in senior positions in the financial sector is stagnating, according to the British regulator FCA. For brokerage houses, the female quota is particularly low.
Competition through dark pools
Billy Hafeez, head of research house MacroHive, however, doubts that shorter trading hours will lead to higher liquidity in the remaining trading hours. Investors would probably increasingly switch to off-exchange platforms, so-called dark pools. After all, they wanted to react immediately to the rapidly changing news situation.
According to Ben Springett, head of electronic trading at the investment bank Jefferies, an alignment of trading hours between the official exchanges and the off-exchange platforms is crucial. If the latter extend their trading hours, this would be counterproductive.
According to the industry service Tabb 9.6 percent of all stock exchange transactions were conducted in July via dark pools. This is the highest level since the entry into force of stricter EU rules for the financial markets at the beginning of 2018. European regulators want to curb over-the-counter trading because it is less transparent. Dark pools are popular with institutional investors because they can buy or sell larger security packages without affecting the stock market price.
Investment strategist Chris Bailey of wealth adviser Raymond James points out another aspect: "The strength of London is the overlap with both Asian and US trading, and the current environment is just right."
(Reuters / cash)