LSE Consultation on Market Structure and Trading Hours

Thanks to ShareSoc for pointing out to me that the London Stock Exchange (LSE) are undertaking a public consultation on such matters as trading hours and auction activity.

On the issue of trading hours, these are basically 08.00 to 16.30 at present although there is an opening auction at 7.50, a closing auction at 16.30 and a midday auction at 12.00 for SETS companies. These are longer hours than most international exchanges but do of course provide some overlap with US and Far East exchanges.

Reducing the hours might however improve liquidity and price discovery as the same number of trades would be concentrated into a shorter period of time.

For private investors, it might encourage more direct investment in shares. At present those who wish to keep up with company news have to get up quite early because RNS announcements are generally issued at 7.00 am so the news has to be digested along with breakfast before the market opens. It might also help stockbrokers and investment managers who have to get in the office early and have a very long day in reality thus restricting the kind of people who can do the job. Or as the consultation puts it: “Help encourage staff diversity” and make a “Positive impact on mental wellbeing of staff”.

Personally I would be quite happy with a 9.00 am opening time and a 4.00 pm close time, and I will be submitting a response accordingly.

Note that some commentators on Twitter suggested RNS announcements should be done after market close time to allow private investors to digest the information before trading in the morning – this might help those who are employed during the day.  The LSE consultation is not about that – RNS announcements can be done at any time and it is only convention, so far as I am aware, that most are done early in the morning. I would not personally be in favour of such a change and I doubt issuers would be either. It might mean more work in the evening when I already spend time reviewing the days trading and significant share price movements ahead of any trading the following day.  The other downside is that it might encourage trading on alternative venues overnight by big investors to the prejudice of private investors – the latter being unable to trade until the next morning.

The LSE is also proposing to reduce the number of auctions for SETSqx stocks (those AIM stocks and small cap stocks). The proposal is to reduce the auctions from 5 to 3 per day which may improve price discovery and trading sizes. I can see no problem with doing so.

There are some other rather technical questions in the consultation which you can read about here: https://tinyurl.com/qntpxlq . You can make a response directly or you can simply advise ShareSoc of your views who will be submitting a response on behalf of private investors. Go here for how to do that: https://tinyurl.com/yx4e6d79

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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