If you're a trader in the U.S., I take my hat off to you: you're in the right location. If, like me, you're a trader in Europe, you have my pity.
At the time of writing this article, the market cap of the S&P 500 index is approximately $23tln, compared to $13tln for the STOXX 600. And yet, trading hours in the U.S. are 6.5 hours a day (starting at 9.30am and ending at 4pm), whereas trading hours in Europe are typically 8.5 hours a day (starting at 8am and ending at 4.30pm).
It hardly seems fair. In Europe, we have to work two extra hours each day. In the U.S., by comparison, you get to come in late and to go home early.
It's not just unfair, it's also nonsensical. The U.S. is the market bellwether. Many traders and algorithms struggle to find volumes late morning and late afternoon for small and mid-cap names (and even some large cap names). The only event that makes volumes pick up again is when the U.S. markets open.
If Europe reduced its trading hours, volumes and activity would surely pick up. This would benefit investors: stock spreads would be reduced and it would be easier to build a position. No matter how smart the algorithms and how many trading venues exist, if trading hours are stretched out too much, volumes go down and spreads widen.
The other irony is that closing auction volumes in Europe are much higher than in the U.S., meaning that many of us have to put trades on hold until we come close to the auction, making standard order book trading hours even less well-used.
We have managed to build cross-country MTFs, so surely we can agree to shorten trading hours? Maybe we can even agree to some trading holidays for the equity trading world? Many of us worked on the 26th of December to cover the European markets, even while the U.K. observed Boxing Day. It's not just about wanting to take a day off: when a major EU market is shut for the day, volumes overall go down around 50-60%.The beneficiary would be the investor and not us.
You might read this and think that I'm after shorter working hours. On the contrary, my colleagues in the U.S. spend more time in the office than I do, but they spend the rest of their time focusing on trading research and analytics for clients. Of course, the longer European trading day has some advantages - we get to take hour long lunch breaks and coffee breaks because there's nothing going on, but this is hardly a reason for keeping markets open for longer than necessary.
Robert Jones is a pseudonym
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