After-Hours Trading Revolution
Wall Street is about to undergo a revolution. You have probably heard about after-hours trading but do you know how to trade after traditional business hours? Here are some tips and information on the business of trading on the stock market with after-hours and trading with computerized trading systems.
The process of trading after normal business hours is spurred by and made possible by Electronic Communications Networks (ECNs). ECNs bring together buyers and sellers of certain stocks, the same as brokers. There are nine ECNs to date, such as Instinet, Island and Nextrade. The phenomenal growth of Internet-based stock trading contributed to the birth of ECNs so that now anyone can trade stocks at any time of the day.
Charles Schwab, the largest U.S. discount and Web brokerage, has recently begun after-hours trading. Ameritrade, an online brokerage firm, is offering the service through at least four trading systems. What this means is that eventually you will see a seamlessly integrated worldwide trading system. The after-hours trading market has begun but it has taken off slowly in order to keep technology-related problems to a minimum.
ECNs a Threat?
To this day, somewhere between 10 and 25% of NASDAQ's share-trading volume has swung over to ECNs. Some ECNs have even applied to the SEC to become stock exchanges themselves. Traditional stock exchanges might soon be forced to join with ECNs in a centralized market.
The big American stock exchanges are making moves to gear up for after-hours trading. The New York Stock Exchange is planning to offer the service around the third quarter of 2000 while the Chicago Stock Exchange is awaiting SEC approval to begin its launch of after-hours trading. Observers agree that significant growth in after-hours trading will only come when the big stock exchanges get involved.
There is little argument against the inevitability of around-the-clock trading. Overseas markets are moving closer to consolidation and financial markets are becoming more global. By November of the year 2000, eight of Europe's largest stock markets will be joined together in a "joint electronic interface". At the same time, more mutual funds are starting to invest in overseas companies.
After-hours trading is going to catch on but it will mean a change of habit for most investors.
The following firms have or will soon offer after-hour trading:
Datek Online (Island ECN)
Dreyfus Brokerage, Discover Brokerage (MarketXT)
Solomon Smith Barney (MarketXT)
TD Waterhouse (Island ECN)
Charles Schwab (REDIbook)
Fidelity, DLJdirect (Redibook)
Ameritrade (Island, MarketXT, Knight/Trimark, Chicago Stock Exchange)
Merrill Lynch (Archipalgo, Knight/Trimark)
Wit Capital (Proprietary System)
CyberBroker (Island, Nextrade, MarketXT, others)
Onlinetradinginc.com (Nextrade ECN)
The Chicago Stock Exchange and NYSE have plans or are awaiting SEC decision. NASDAQ is not committing to a timeline.