Shortening the European trading day could be detrimental to European markets and investors, warned a trade group for stock exchanges.
Responding to calls for a review of equity trading hours across Europe, the Federation of European Securities Exchanges said in a news release Wednesday that a number of complex issues would need to be "thoroughly examined," including the impact on end investors, the potential threat to liquidity and the competitiveness of 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," the release said.
European trading operates between 8 a.m. and 4.30 p.m. Those in favor of shortening market trading hours by around 90 minutes have highlighted benefits including a boost to diversity in terms of trading professionals and the potential to improve employee well-being.
FESE addressed a number of issues in shortening trading hours, saying liquidity and transparent price formation could be negatively affected.
The longer trading day in Europe also allows for interaction with other markets, crossing over with the U.S. and Asia markets. "One of Europe's advantages in this regard is that it is uniquely situated to span both the Asian close and the U.S. open. The reduction of trading hours in Europe would have an impact on this unique status and potentially offer competitive advantages to other jurisdictions to expand their trading hours to compensate for this new gap. ... Such a decision would place European markets at a competitive disadvantage," FESE warned.
While exchanges recognize the need to ensure employee well-being, "the length of the trading day, in itself, does not have a negative impact on the working culture of trading," FESE said. "The claims of better work-life balance are based on the premise that narrowing the time frame in which stocks are traded on regulated markets would open the door to a better work-life balance in the industry. Exchanges would reject this premise and note that other measures would need to be deployed at an enterprise level to improve the well-being of employees."
FESE represents 36 exchanges across Europe.
