It's 10 P.M. Time To Start Trading

After-hours markets are opening for business

Imagine coming home, having dinner, then powering up the PC to fine-tune your portfolio--in real time. You would dial in to your online broker, study stock prices and late earnings reports, and put in your orders. Until 9 p.m. or 10 p.m., maybe even midnight, you would see your order executed immediately, not jammed into the next day's opening-bell crush.

No, you can't do this now. But by September, after-hours stock trading could be giving the new TV season a run for its money. Upstart systems are programming their computers to match up retail buyers and sellers in the evening. These startups are in a race with the NASDAQ stock market, whose board may approve adding a 5-9 p.m. session to its 9:30 a.m. to 4 p.m. trading as early as this summer. (All times are Eastern.) Stocks around the clock may even win the New York Stock Exchange's stamp of approval. It plans to add early-morning and evening sessions by mid-2000, when a new trading floor opens.

CRITICAL MASS. For the individual investor, trading after dark will initially be a scary proposition. While the exchanges and trading systems are still drafting rules for Securities & Exchange Commission approval, it's certain the markets will be thin, volatile, and limited. The NASDAQ system, for example, may trade only 500 of its 5,400 stocks.

Your success as an evening trader will depend heavily on choices your broker makes. Brokers will want to direct orders to their favorite trading system. But if that system lacks liquidity--a critical mass of orders--you could get a poor price or no trade at all. The SEC is likely to force rival systems to link up their after-hours activity, so an order that can't be matched in one will be posted on others. But those rules have not been worked out. Even NASDAQ's entry won't guarantee that evening markets will work like daytime trading: Its current plan, for example, would allow its market-making dealers to decide from one session to the next whether to participate.

Institutions already have after-hours markets. Pension and mutual funds that want to act on news that comes out after the closing bell can trade on Instinet, Reuters Group's electronic order-crossing system. Instinet may open up to retail investors by yearend. Another trading platform, Island ECN, tries to match retail and institutional trades until 5:15 p.m., but few of its 150 subscribing brokers participate.

HIGH HURDLES. Potential demand, nevertheless, is strong. Online brokers report that customers place 40% of their orders outside market hours, to be executed the next day, says Michael Satow, president of startup Eclipse Trading. "All these people are shopping when the store is closed," he says. Eclipse's plans for its IndivEX system show the hurdles that after-hours trading must overcome. To boost the odds of matching buyers and sellers, IndivEX will trade no more than 200 stocks. To focus on individual traders, it will cap orders at around $150,000. And to limit the dangers of volatility, it will take only limit orders--instructions to buy or sell at a set price or better--not market orders, which execute at the prevailing price. (Island, too, takes only limit orders.)

Startups are not likely to pull it off by themselves. The heft of the NASDAQ and the New York Stock Exchange may be essential to draw the volume that will make evening trading work. Investors still will have to tread carefully. They will need to push their brokers hard to go where the markets are deepest and the prices best. Even then, "unless you absolutely have to get out of a stock, you should trade when the markets are liquid--during the day," says John Markese, president of the American Association of Individual Investors. Daytime will be primetime for stocks for a long while to come.

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