Time to Trade

While others are fighting over shorter workweeks, investors in Germany may soon be facing shorter trading weeks. A Deutsche Börse spokeswoman this week said that the Frankfurt stock exchange operator was currently weighing the demands of international investors for harmonized trading hours across Europe.

Market insiders now expect Germany's major stock exchange to return to its old working day closing time, 5.30 p.m., before year's end, which would mean that international investors could close their books at the same time in Frankfurt, London and Paris.

Just three years ago, Deutsche Börse extended its trading hours until 8 p.m. on regular trading days as well as to certain national holidays. It was a controversial move in a country that has taken decades for a minimal liberalization of shopping hours, and where shops still remain firmly closed on public holidays and Sundays.

But this was about real money. Or so Deutsche Börse thought at the height of the stock market boom. Its move targeted above all private investors who had only just discovered equities and were still flocking to the market in 2000, and often had too little time to speculate during office hours.

But the market decided against after-hours trading. Once battered private investors fled the market, after-hours trading lost its allure. In May, just 7 percent of all orders were made during evening trading, which accounts for nearly one-quarter of daily trading hours. Trading volume on public holidays rarely exceeded 5 percent of the average working day turnover.

Investors, especially major fund managers, increasingly complained of price distortions as even small orders caused serious price fluctuations. Liquidity in evening trading is generally so low that investors have to limit all orders to avoid nasty surprises.

Most fund managers stop trading at 6 p.m. The banks, in turn, have long complained about the unjustifiable cost of keeping employees around after hours when nobody really wants to do business.

Some regional German exchanges, which also report busier evening trading, have protested the plans, but are unlikely to be able to resist the decision.

Electronic banks, meanwhile, would be the main losers. Their customers tend to want to trade when they get home from work. For these banks, shorter official trading hours would therefore provide another incentive to expand their off-exchange trading platforms.