The mutual fund industry's two biggies are shrugging off
extended trading hours, but they're the only ones.
According to the nation's largest fund companies, extended trading hours on the
and proposals for extended trading hours on the
New York Stock Exchange
will have about as much impact as a gnat on an ox's behind. But smaller fund firms are taking the changes a little more seriously and making plans to beef up their nighttime trading desks.
say it will be business as usual when the exchanges begin burning the not-quite-midnight oil.
'I don't see how I can walk away and not leave my desk staffed even minimally.'
The biggest question that fund firms face once hours are extended: When will they price securities in their portfolios to determine a fund's net asset value (the price at which shares are bought and sold)?
Not a problem, say Fidelity and Vanguard. By law, fund firms are required to price at least once a day, and almost all do after the market closes. No change there for these fund behemoths.
"As we view them, the scenarios on the table appear to have a break between 4
p.m. ET and the start of a later trading session, and that break would create a natural window within which to continue to price the funds starting at 4," says Scott Beryl, a Fidelity spokesman.
"We still intend to determine our pricing at 4 p.m. like we do every trading day when this takes place," says Vanguard spokesman John Demming.
Neither firm seems concerned about the impact of extended hours on their funds' holdings. So there'll be no changes at the trading desks either, they say. "It doesn't strike us that an additional trading session in the evening would add significantly to trading volumes," says Fidelity's Beryl. "Many stocks trade after hours on various exchanges around the world as it is."
"The extended hours are geared more toward individual investors and not toward institutional investors like Vanguard," says Demming.
Fidelity and Vanguard are exceptions, though. While other firms still plan to price funds at 4 p.m. -- and none plan to sell fund shares to the public during the evening -- many are making changes to their stock trading desks in preparation for the extended hours. They admit, though, they're not sure what to expect.
"Where there's liquidity, we are going to be there," says Mike Ryan, head trader at
State Street Research
in Boston, which has $55 billion in assets under management. "You'd have to be pretty optimistic to think that you'll be able to trade at a normal clip, but at least as long as there is the possibility, we are going to have to have access to portfolio managers, analysts, compliance and systems people."
With six kids vying for his attention at home, Ryan's not thrilled by the prospect of being on call after the 4 p.m. bell. "I picture myself with a monitor strapped to the end of a phone," he says. "It's a bit of an infringement, but when the market's open, we are going to have to be there."
That's the gist of what Dave Briggs told the "more hostile" employees on the domestic equity trading desk at Pittsburgh's
when he gave them the news that longer hours for the stock markets meant longer hours for them.
"We are professionals and we've got to be there," says Briggs, who oversees trades for about $15 billion of the firm's $115 billion in assets under management. "I remember
in the 1980s when there wasn't a lot going on, and now it's huge," he says, referring to the
-owned broker-dealer known for facilitating after-hours and preopen trading.
Transamerica's head trader echoes the sentiment that when there's trading, fund firms can't afford to ignore the action. "I don't see how I can walk away and not leave my desk staffed even minimally," says Lisa Hansen, senior equities trader at
in San Francisco, which has $40 billion in assets under management.
And it's not just a matter of being there during the extended hours. Some of the traders in the fund firms' trenches say extended hours will likely have an impact on trading in normal sessions as well. "Fund managers tend to do their trading in the first couple of hours in the morning," says Andrew Couch, head of U.S. equities for London-based
Investec Guinness Flight
, which has $20 billion in assets under management globally. "It's just one of those unexplained things."
"But the fall in the market
Tuesday occurred at the end of the day," he says, explaining that recently the trend has been toward more activity later in the day. "We think that extended hours will exacerbate that trend."
Couch says his hours have not yet changed officially, though plans to deal with an extended trading session have been a recent topic of discussion. "It's an extra five hours," says Couch. "We'll become like ship brokers who have got to be reachable anytime day or night for cargo to change hands."
"I will become even more boring than I already am," says Couch, "and check
stock prices before going to bed."
Another concern for the fund industry, says Couch, is that the appeal of evening stock trading will drain assets from funds. "People are going to be able to come home from work and trade in the evenings," he says. "That may encourage a greater part of the retail investors to move into stocks."