Datek Begins After-Hours Trading

On Tuesday afternoon -- with a minimum of fanfare -- Datek became the first major online brokerage to offer its clients the opportunity to trade after hours.
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It's here.

Datek Online

, the bare-bones online brokerage, quietly started after-hours trading Tuesday evening.

Online investors were able to buy and sell

Nasdaq

stocks in limit orders placed from 4 p.m. to 5:15 p.m. EDT by accessing the

Island

electronic communications network through Datek, a firm spokeswoman confirmed.

Datek says it offered trading on a limited basis through the firm's express servers, a streamlined trading service without graphics that only allows for limit orders. But on Wednesday, the company plans to extend the service across its system, the spokeswoman says.

Datek is the first major online brokerage to offer its clients the somewhat controversial opportunity to trade after hours.

Discover Brokerage

, a unit of

Morgan Stanley Dean Witter

(MWD)

, also plans to offer extended trading through

Eclipse Trading

, an alternative trading system. Eclipse said Tuesday it's on track to start up later this summer.

Both the

New York Stock Exchange

and the

Nasdaq Stock Market

were running quickly

toward after-hours trading this spring before

pulling back to study the issue further.

At a June 30 summit of industry leaders and stock exchanges organized by the

Securities and Exchange Commission

, securities firms and regulatory officials decided to create four committees to study extended-trading related issues and called for cooperation and coordination among the players. And SEC Chairman

Arthur Levitt

has consistently indicated that he wants to make sure investors are protected in any after-hours trading environment. An SEC spokesman wasn't available to comment Tuesday afternoon.

Datek told analysts during a conference call on earnings Tuesday morning that it would be starting extended trading this summer, but didn't say that the trading was debuting this week, a spokeswoman says.

One Datek customer said in an email that he had tried to buy 300 shares of a telecom stock after hours but couldn't find a seller. "I did notice a lot of activity on

Microsoft

(MSFT) - Get Report

and

Dell

(DELL) - Get Report

on Island. The more liquid issues like these is where most of the action was," he wrote.

The customer said he received an email a few days ago indicating that the company would start online trading. Then, on Tuesday, there was an option to enable after-hours trading by reading through a disclaimer.

Datek's disclaimer laid out some of the risks of after-hours investing that academics, regulators and securities firms have expressed during the past few months. "Stock prices may be more volatile. News stories can have a greater impact on the price movement of a stock. The same liquidity may not exist on the Island ECN during after hours as it does during normal market hours. Less liquidity usually results in wider spreads between bids and offers. This raises the effective cost to trade in such markets."