January 30, 2020 / 2:36 PM / 24 days ago

Banks propose one-year trial of shorter European trading day

LONDON, Jan 30 (Reuters) - Two leading financial industry bodies have called for a one-year trial of a shorter trading day for European stock exchanges to make markets more efficient, lift volumes, and attract more women to the sector.

The Association for Financial Markets in Europe (AFME), a banking lobby, and the Investment Association (IA), which represent asset managers, said trading on the London Stock Exchange should be cut by 90 minutes, shrinking the trading day to seven hours.

They proposed two options - for the day to run between 0900 and 1600 UK time, or from 0930 to 1630 UK time.

“AFME and the IA would also support a 12-month pilot across all major European exchanges and trading venues in order to test market structure benefits and impacts,” the industry bodies said in a statement on Thursday.

It is unclear if all of Europe’s main bourses would agree to cutting trading hours, given concerns that business could end up moving to Asia or the United States, with which their current hours overlap.

AFME and the IA were publishing their formal response to a public consultation by the London Stock Exchange on suggestions for cutting trading hours.

Shortening the trading day from its present 8.5 hours would mean trades being more evenly distributed to cut costs for investors, which rise when liquidity is thin, and prevent transactions bunching up in the last 2.5 hours, the trade bodies said.

“For comparison, the U.S. market has shorter trading hours but six times the turnover, with an overall much lower cost of trading across the day, demonstrating greater stability in liquidity conditions across the whole trading day.”

The Japanese market is open for six hours, but with a one-hour lunch break.

Adjusting market hours is also a first step towards further improving diversity in the financial sector, AFME said.

Trading remains one of the areas of financial services where staff face significant mental health issues, with excessively long hours contributing to the problem, AFME and IA said. (Reporting by Huw Jones; Editing by Jan Harvey)

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