LSE CONTEMPLATES SHORTER TRADING DAY.
The London Stock Exchange (LSE) launched a consultation exploring a possible reduction in market hours in order to encourage staff diversity, concentrate liquidity in a shorter time frame, and positively impact the mental well-being of staff.
The shorter trading hours would require changes to regulatory reporting and commitments for trading on systematic internalisers and OTC. It would also mean reducing the important overlap with US and Asia trading hours. However, LSE also said all main European trading venues would have to agree to shorter hours in order to maximise the potential.
The consultation, which ends on January 31st, sought feedback on five options: four covering shorter hours, and a fifth on making no changes to the trading day that currently starts at 08:00 local time (07:00 GMT in summer) and ends at 16:30.
“There is a general sentiment that a co-ordinated approach by European exchanges would be required in order for a change to be effective,” the LSE said. “Regulatory approval would be needed for any change to go ahead, it added.
Europe has the longest stock trading hours in the world, between eight and 10 hours, compared to 6-8 hours on Wall Street and Singapore. Traders say shorter hours would cut the overlap in trading hours with the United States and have far reaching benefits for traders, but could drive some business to exchanges outside Europe.
The Investment Association, which represents asset managers, said it was very pleased that the LSE had listened to traders’ calls. “We need to call time on the long hours culture, which is detrimental to diversity and mental health, and inefficient for the markets,” said Galina Dimitrova, the IA’s director for investment and capital markets.
“A shorter trading day would not only improve market structure but would also go a long way towards building a more diverse trading floor and fostering better mental health,” said April Day, head of equities at the Association for Financial Markets in Europe (AFME). “Equities trading risks lagging behind a wider financial services industry push for more diversity and inclusion unless the long trading day is tackled by an industry-wide approach.”
Both industry groups also argue that the longer trading hours compared to the other global markets are no longer serving material benefits to savers, investors or firms. One reason is that liquidity would be improved by a more concentrated trading window. Market data seems to support this. On the LSE on any given day, around a third of trading volume takes place in the final hour of opening hours, when index-tracking funds are forced to balance their holdings. Conversely, there is comparatively little trading volume in the first hour of the day, which in turn affects bid-offer spreads.
©BestExecution 2020
[divider_to_top]
