A Night Owl's Guide to After-Hours Trading: Update

Online brokers have brought after-hours trading from concept to reality while the large stock exchanges dragged their feet.
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Online investors don't have to wait any longer to get in on after-hours trading.

Although it looked like extended trading was going to get held up by bricks-and-mortar bureaucracy, in the past few weeks online brokerages -- and even one small regional stock exchange -- have gotten things moving.

Wednesday,

MarketXT

, formerly

Eclipse Trading

, announced that it would be offering extended trading hours to clients of

Dreyfus

and

Discover

, bringing retail investors further into the after-hours hubbub. From 6 p.m. to 8 p.m. EDT, MarketXT will host trading for the top 100

S&P

stocks and the top 100

Nasdaq

stocks.

On Aug. 20, the

Chicago Stock Exchange

said it would extend trading hours for certain stocks by two and a half hours. That came on the back of the Aug. 19 news from

TD Waterhouse

(TWE)

that it planned to get an after-hours trading session up within six weeks.

It was only two days before, on Aug. 17, that

E*Trade

(EGRP)

announced its plans to let clients trade until 6:30 p.m. EDT. E*Trade will offer the service in conjunction with

Instinet

, which traditionally has been an after-hours trading vehicle for institutional clients and professionals.

Some broker-dealers, such as

Siebert Financial

(SIEB) - Get Report

, already allow their customers to place trades after hours with a broker through Instinet, a unit of

Reuters

(RTRSY)

.

But the first after-hours online investing at a major brokerage began at

Datek Online

in mid-July through the firm's

Island

electronic trading system from 4 p.m. to 5:15 p.m. EDT. While some online investors at first said they had a hard time getting orders filled, Datek said recently that volume has been increasing.

Like Instinet, Island is one of nine electronic communications networks that electronically match buy and sell orders. It's majority owned by Datek. TD Waterhouse has a small stake in the system, which has challenged Instinet's leader position during the past two years by attracting investors in heavily traded Internet stocks. Like Instinet, the Island system is open for trading both before and after the market closes, drawing orders from the broker-dealers and daytrading firms that are its subscribers.

It's these electronic trading systems that online brokerages seem to be leaning on as an outlet for extended trading. They haven't announced any formal plans for after-hours trading, but

DLJdirect

(DIR)

,

Charles Schwab

(SCH)

and

Fidelity

all said recently after buying stakes in

Spear Leeds & Kellogg's RediBook

ECN that their revamped version of this ECN would be central to their after-hours platforms.

In part, that's because the

New York Stock Exchange

has opted to stay out of the after-hours trading fray until well into 2000. The

National Association of Securities Dealers

, which runs Nasdaq, got the green light from its board to look into extended trading earlier this summer. But after the NYSE decided not to go forward and the

Securities and Exchange Commission

voiced its concerns, the NASD put extended trading on the backburner.

Four discussion groups of industry players set up by the SEC at the end of June to discuss extended trading are expected to come out with reports this fall that could provide some sort of outline for how the major stock and options exchanges will take part in the extended-trading phenomenon.

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