It’s important to stress too that the start of the day and the end of the day are two very different things for traders in terms of their importance. A later start — which used to happen at the London Stock Exchange — is neither here nor there. The opening auction is an insignificant part of daily trading volume. A stockbroker’s day begins well before the opening bell anyway with a plethora of meetings, calls and frantically written sales and trading notes. Putting back the official start wouldn’t change that, even if it made things a little less frenetic.
Messing with the closing auction would be more perilous. About one-third of daily trading volume bunches into those final minutes, with exchange-traded funds looking to set their hedging on the closing price. Asset managers’ trading desks also increasingly have to wait to complete their orders at the close of play because they’re determined by the day’s trading volumes. An earlier close might make it more difficult to complete orders efficiently.
Neither would shortening the trading day by 90 minutes encourage U.S. and Asian trading in European equities, which have hardly had a great run. The EuroStoxx 50 is still below its 2015 highs, whereas the S&P500 has risen about 50% on a similar time-frame. Having a proper overlap with New York trading hours is vital.
True, the cultural shift signified by moving away from the long-hours ethos can’t be dismissed, and it could even improve the markets’ functioning by allowing longer digestion of corporate news. But the benefits seems marginal. Financial markets are about much more than stock exchanges. Much activity happens outside of the official marketplace, especially in derivatives.
Would having less time lead to greater efficiency? Maybe, though it’s not certain when there are so many other tasks to swallow up that notional extra time.
The unhappy reality is that shorter trading hours are unlikely to change worker conditions or make employment at an equity broker or exchange much more conducive to people with family commitments. The open-all-hours mantra — from Hong Kong to London to New York and back again — has long prevailed in financial markets.
The trend in equity markets is toward fewer humans anyway, with technology and electronic trading increasingly dominant. It seems odd, therefore, to shorten the availability of people when it might be more logical to fight back by improving and widening the services they offer.
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Marcus Ashworth is a Bloomberg Opinion columnist covering European markets. He spent three decades in the banking industry, most recently as chief markets strategist at Haitong Securities in London.