Longer stock trading hours mustn’t shorten investors’ time horizons, state securities regulators warn
WASHINGTON (June 30, 1999) – Longer stock trading hours must not encourage Main Street investors to shorten their investment time horizons, state securities regulators cautioned today, as a regulatory summit opened on extending trading sessions at the major US stock markets.
“We’re now a nation of stockholders and the markets are reacting by offering convenience—just as banks did by installing ATMs,” said Peter C. Hildreth, New Hampshire’s director of securities regulation and president of the North American Securities Administrators Association (NASAA). Hildreth said state securities regulators’ concerns extend beyond possible volatility and market surveillance issues during extended hours, or the impact on smaller brokerage firms.
Hildreth agrees with Nasdaq Chief Executive Frank Zarb that 24-hour trading is probably inevitable. “But just because investors will be able to trade 24 hours a day doesn’t mean they should have an investment time horizon of 24 hours or less. The real money on Wall Street will continue to be made the old-fashioned way—by investors who find quality companies in growth industries and hold them for the long term.”
Securities regulators, stock market and Wall Street executives are meeting in New York to discuss the implications of longer trading hours by the Nasdaq Stock Market and the New York Stock Exchange.
Hildreth said the information and technology revolution sparked by the Internet has largely leveled the playing field between Wall Street and Main Street. “Investors, however, need to use their new power responsibly and not get carried away. There’s a world of difference between investing on one hand and day trading or online trading on the other. All of us—the securities industry, regulators, consumer groups, the schools—need to do a better job of educating investors that the slow-but-steady approach works best.” For their part, state securities regulators are now rolling out an investor education curriculum, called “Financial Literacy 2001,” for high school seniors across the nation.
In the past year, state securities regulators have raised concerns about day trading and online brokerage practices. Regulators in Massachusetts, Texas and elsewhere have taken enforcement actions against day trading firms for misrepresentation, unregistered activity and other violations of securities laws. A NASAA task force on day trading expects to publish its report next month.
In February, the New York Attorney General launched an inquiry into online brokerage firms following complaints from investors who had trouble getting orders executed because of highly publicized computer outages. The inquiry is expected to be completed later this summer.
In early May, at a conference in Washington, D.C, NASAA highlighted advertising campaigns by some of the major online brokerage firms. NASAA President Hildreth was critical of some of the ads, saying they promoted a “day trading mentality” and ridiculed long-term investing and those who owned mutual funds.