Still in the dark about after-hours trading? You're not alone.
Although wirehouses have been among the most powerful supporters of extended trading hours, they aren't telling brokers much about how they might be affected.
So, will brokers be manning graveyard shifts, taking orders from insomniac clients at 2 a.m.?
Fear not, say several retail firms. Although wirehouses remain tight-lipped about any specifics associated with extended trading hours, the graveyard shift just isn't in the cards, they say.
"We're going to be ready when it comes," says Paul Underwood, co-head of Salomon Smith Barney's retail division. "But we don't think that every financial consultant will have to be at his or her desk 24 hours a day."
Underwood says client interest in trading during an evening session will be minimal, at least initially, and the market will be thin. What investors really want is the ability to place an order during evening hours, not execute that order, adds Jay Mandelbaum, SSB's other retail chief. "I've heard several CEOs from discount online brokerage firms say that anywhere from 25% to 50% of their volume is actually entered into the Internet after the market is closed," Mandelbaum says.
Merrill Lynch spokesperson Erik Hendrickson says it's "premature" to discuss steps the firm might be taking to prepare brokers for after-hours trading. Producers at Merrill tell RR they haven't heard a peep from the firm on the subject.
Likewise, PaineWebber spokesperson Paul Thomas says the conversation is premature. PaineWebber also sees signs that investor interest may be lukewarm, at best. For example, PaineWebber's investor confidence survey in June showed that just 8% of traders "strongly favored" extended hours, says Thomas.
"We don't have any specific plans on how it will be implemented," he says. "Until we know what the final decisions are [from the exchanges], there's not a whole lot more for us to say."
Many producers contacted by RR are especially concerned about suitability and compliance issues associated with an evening session. One broker even went so far as to say that after-hours trading could be another limited partnership debacle in the making. And smaller firms are feeling especially vulnerable--some small firms have already discussed covering for each other during late trading sessions.
For brokers, maybe life won't change so dramatically. "The vast majority of financial consultants already work well past the market close," Mandelbaum says. "They already are giving after-hours financial advice."
Nasdaq and the NYSE are considering an evening session, possibly from 5:30 p.m. to 10 p.m. But even that won't materialize until all Y2K issues are ironed out (and possibly until after decimalization hits in June 2000), says Bill Broka, senior vice president of trading and market services at Nasdaq.
Participation among broker/dealers will be strictly voluntary. "Every firm is going to have to make that decision on its own," Broka says.
The NASD has established several working groups to explore a wide variety of issues surrounding extended trading hours (see www.nasd.com for details), but none specifically addresses the broker's role.
An investor protection and education working group is discussing, among other things, how to ensure that investors who are used to placing orders at night for execution on the opening don't unwittingly trade during a late session. One idea being discussed is a system whereby investors must "opt-in" to the after-hours session.
