Federation of European Securities Exchanges opposes shortening of trading hours

There are currently no liquidity issues on European regulated markets that would motivate a change of trading hours, FESE says.

The Federation of European Securities Exchanges (FESE), which represents 36 exchanges in equities, bonds, derivatives and commodities, today posted its detailed response to a consultation launched by the Association of Financial Markets in Europe (AFME), and the Investment Association (IA) on proposals for a review market opening hours across Europe.

According to the Federation, a shortening of the European trading day could be a move in the wrong direction and overall detrimental to European markets and end investors.

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, FESE argues. 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.

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 adds.

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, FESE argues. Other measures at an enterprise level would be necessary to facilitate improved work-life balance (e.g. working in shifts, flexible working hours).

The negative impact on the interplay of markets and the economy in Europe has been left aside in this debate. Consideration must be given to the enormous size of the markets and economies affected, not forgetting the symbiotic relationship between trading hours and the real economy, according to FESE. Given the challenge of recapitalising European economies due to the Covid-19 crisis, efficient, competitive, and well-functioning European markets are of paramount importance to ensure that economies recover from the current crisis. As such, it is crucial that they remain available for market participants according to their needs.

Given the considerations outlined above, FESE believes current trading hours best serve the interest of investors.