LSE Could Reduce Trading Hours

The London Stock Exchange is consulting on whether to shorten its trading hours in a bid to improve workers' health and improve liquidity

James Gard 11 December, 2019 | 3:44PM

London Stock Exchange

The London Stock Exchange and other European exchanges could shorten their trading hours by up to 90 minutes a day, with markets opening later and closing earlier. 

The London Stock Exchange is asking its members whether it should reduce its trading day. It says the move would bring it closer to global norms and potentially improve the work life balance of traders.

Currently the UK stock market is open between 8am and 4.30pm, during which time investors can buy and sell shares. But elsewhere in the world the trading day is shorter - the New York Stock Exchange, for example, is open from 9.30am to 4pm, some two hours less per day. 

The LSE’s consultation asks the question: “Equity markets in Europe are open for 8.5 hours, whereas most other global financial centres are open between 5-6.5 hours. Do you consider the longer hours in Europe a benefit to liquidity?”

Members have been given five options to choose from for the market's trading hours: 8.30 to 15.30, 8.30 to 16.00, 9.00 to 16.00, 9.00 to 16.30, or keeping the existing 8-4.30pm.

They have until the end of January to put forward views on the change as part of a consultation backed by trade bodies the Investment Association and Association for Financial Markets in Europe (AFME). Lobbyists have asked nine stock exchanges across Europe to consider changing their trading hours including those in Germany, Amsterdam and France among others. 

An Early Start

London has traditionally benefited from its early start to the trading day as it overlaps with Asia’s closing markets, while a later close allows it to overlap with early trading in the US. The LSE has asked its members if a change to earlier or later hours would affect trading and damage its appeal to investors.

The proposals aim to improve the work-life balance of those working in the City, but also to boost trading volumes. The Investment Association says “shortening hours would concentrate liquidity leading to more consistent trading costs”. Often trading tends to spike at the beginning of the day as traders react to the morning’s announcements, and also towards the end of the day.

Lobby groups also argue there would be broader societal benefits to shorter hours, making the profession more appealing to working mothers, for example, and reducing stress levels.

“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,” says April Day, Managing Director, head of equities at AFME.

Brewin Dolphin's head of dealing, Darren Norman, says he recently advertised an equity dealer role in London and despite the large volume of applications, the lack of female applicants was noticeable. 

"If the LSE idea makes progress for people and encourages more female professionals to consider a career, or returning to a career in dealing, this has to be a good thing. We will be watching the LSE consultation with great interest,” he adds.

The LSE’s existing hours co-ordinate roughly with many European exchanges, in that trading begins and ends at the same time (9am Central European Time) – but London traders and brokers generally have to be at their desks earlier because the trading starts at 8am rather than 9am. The IA says that the changes aimed at a later start would “provide greater time for traders and the market to digest corporate announcements”.

Brewin's Norman argues that "it should be possible to manage working hours more effectively" across continents given the advances in trading technology and risk management techniques in recent years.

Traders aren’t out of the door at 4.30pm, either, as the LSE undergoes a closing auction when stocks' final prices for the day are determined. Then the process of settlement and payment begins for back-office staff who reconcile payments between various counterparties. On a day when there's an outage, such as on August 16 this year, traders lost 100 minutes from the start of the trading day.

 

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About Author

James Gard  is content editor for Morningstar.co.uk

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