In November 2019, the Association of Financial Markets in Europe (AFME), and the Investment Association (IA) called for European equity trading venues to review market opening hours across Europe.
The Federation of European Securities Exchanges (FESE) said in a statement today that prior to even considering any changes to trading hours for equities, which could be detrimental to European markets, a number of complex issues need to be examined to fully understand the effects any changes would have which include
- the needs of end investors;
- the interactions between different markets during the length of the trading day;
- the potential threat to liquidity;
- the cross jurisdictional impact across markets and linked products; and
- the competitiveness of the markets
These points alone suggest that a shortening of the European trading day could be a move in the wrong direction and overall detrimental to European markets and end investors, FESE noted.
The Covid-19 crisis has shown that regulated markets are central in times of uncertainty (high volatility and high traded volumes), according to FESE. Transparent, fair and resilient markets offer management of risks and liquidity across global geographies with high integrity and are of the utmost importance.
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“From a liquidity perspective, it is important to underline that there are currently no liquidity issues on European regulated markets, especially at the beginning and at the end of the trading day, that would motivate a change of trading hours. The amount of liquidity present on European markets in the early trading hours and during the latter part of the afternoon demonstrates that the length of the trading day currently reflects investors’ needs”, FESE stated.
Shortening the trading hours of transparent lit exchange markets would further facilitate an unlevel playing field since Systematic Internalisers (SIs) or OTC markets, which already transact a large part of their business outside of exchanges’ main trading hours, would not be subject to such a change.
FESE added that an important issue raised is that of employee well-being. Given that SIs and OTC markets already operate outside current exchange opening hours and that their trading desks are therefore staffed to accommodate these markets and other asset classes, a shortening of the European trading day would have no impact on employee well-being. Other measures at an enterprise level would be necessary to facilitate improved work-life balance (e.g. working in shifts, flexible working hours).
The Federation of European Securities Exchanges (FESE) represents 36 exchanges in equities, bonds, derivatives and commodities through 18 Full Members from 30 countries, as well as 1 Affiliate Member and 1 Observer Member.