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.
\nPrior to even considering any changes to trading hours for equities, which could be
\ndetrimental to European markets, a number of complex issues need to be thoroughly
\nexamined to fully understand the effects any changes would have which includes:
\n\u2022 the needs of end investors;
\n\u2022 the interactions between different markets during the length of the trading day;
\n\u2022 the potential threat to liquidity;
\n\u2022 the cross jurisdictional impact across markets and linked products; and
\n\u2022 the competitiveness of the markets<\/p>\n
These points alone suggest that a shortening of the European trading day could be a move
\nin the wrong direction and overall detrimental to European markets and end investors.
\nThe Covid-19 crisis has shown that regulated markets are central in times of uncertainty
\n(high volatility and high traded volumes). Transparent, fair and resilient markets offer
\nmanagement of risks and liquidity across global geographies with high integrity and are of
\nthe utmost importance. From a liquidity perspective, it is important to underline that there
\nare currently no liquidity issues on European regulated markets, especially at the beginning
\nand at the end of the trading day, that would motivate a change of trading hours. The
\namount of liquidity present on European markets in the early trading hours and during the
\nlatter part of the afternoon demonstrates that the length of the trading day currently
\nreflects investors\u2019 needs.
\nShortening the trading hours of transparent lit exchange markets would further facilitate an
\nunlevel playing field since Systematic Internalisers (SIs) or OTC markets, which already
\ntransact a large part of their business outside of exchanges\u2019 main trading hours, would not
\nbe subject to such a change.
\nAn important issue raised is that of employee well-being. Given that SIs and OTC markets
\nalready operate outside current exchange opening hours and that their trading desks are
\ntherefore staffed to accommodate these markets and other asset classes, a shortening of
\nthe 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).
\nThe negative impact on the interplay of markets and the economy in Europe has been left
\naside in this debate. Consideration must be given to the enormous size of the markets and
\neconomies affected, not forgetting the symbiotic relationship between trading hours and
\nthe real economy. Given the challenge of recapitalising our economies due to the Covid-19
\ncrisis, efficient, competitive, and well-functioning European markets are of paramount
\nimportance to ensure our economies recover from the current crisis. As such, it is crucial
\nthat they remain available for market participants according to their needs.<\/p>\n