The development will come as a blow to many market participants who have made the case that shorter market hours will boost intraday liquidity, drive diversity in the industry, and improve the wellbeing and mental health of traders.

Euronext said its consultation highlighted that mostly UK-based buy- and sell-side firms were in favour of reducing market hours, but proprietary trading firms and retail stakeholders do support the move and continental brokers were largely indifferent.

The European exchange group added that shorter market hours will not act as a silver bullet solution for the complex issues around diversity and mental health, and the coronavirus pandemic has served to bring about more flexible working which could improve market participants’ work/life balance.

Speaking to the Financial Times recently, Euronext chief executive Stéphane Boujnah, said a lack of consensus among market participants and venues means “we do not see a strong enough case to consider modifying our trading hours”.

In June, the London Stock Exchange (LSE) completed its own consultation on the bid for shorter market hours, and concluded that there is overwhelming support for the move.

A majority indicated a preference for reducing the trading day from 8am-4.30pm to 9am-4pm, although some advocated for both 9am-4.30pm and 9.30am-4.30pm. Only a minority of respondents argued that market hours should remain unchanged, according to the LSE.

Comparing Europe’s trading hours with the US, the Association for Financial Markets in Europe and the Investment Association, both supporters of the bid, highlighted that US market has six times the turnover than Europe, despite the shorter market hours.

US markets also generally have lower trading costs and greater stability in liquidity conditions throughout the trading day. Both trade groups also previously said they would support a 12-month pilot on all major European exchanges to test the impact of the changes to market hours.

While Euronext said it found little evidence to support certain claims, such as reduced market hours leading to lower trading costs, it agrees that a harmonious approach across European platforms is a precondition for changing trading hours.

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More than 140 responses were submitted to the LSE following its consultation on shorter market hours earlier this year, and the exchange’s summary of those revealed that the industry is largely in favour of the move.

The majority indicated a preference for reducing the trading day from 8am-4.30pm to 9am-4pm, although some advocated for both 9am-4.30pm and 9.30am-4.30pm. Only a minority of respondents argued that market hours should remain unchanged, according to the LSE.

“We have published the summary of feedback today which shows a significant majority of respondents agreed that a reduction of market hours could lead to improvements in diversity and wellbeing,” a spokesperson for the LSE said.

In terms of the benefits of reducing market hours, particularly in driving diversity and improving the wellbeing of market participants, most agreed these can only be realised effectively if all exchanges across Europe agree to the proposal, given the pan-European nature of many trading roles.

Others also warned of the potential for further dislocation, market complexity and fragmentation if one trading venues agrees to reduce trading hours independently, instead of taking a harmonised approach to the bid across Europe.

“There was also widespread consensus from respondents that any change to trading hours would ideally require a broadly aligned approach across European exchanges and other trading venues,” the LSE spokesperson added.

Commenting on the responses to the consultation, Ben Springett, head of European electronic and program trading at Jefferies, said that proactive engagement from two of the major European exchange groups on the bid to reduce trading hours, including LSE and Euronext, suggests the industry may now be in a position to drive an evolution in equity trading.

“The results of the LSE consultation align closely with anecdotal dialogue I have been having with large asset managers around the world and that has been discussed publicly at a number of industry forums over the last year,” he added. “Any move to change market hours absolutely needs to be done in a harmonised manner, not just to enable some of the intended effects to be captured, but also to ensure we do not increase complexity further in the European landscape.”

Pan-European exchange Euronext launched its own a consultation on the proposal to reduce market hours, and recently extended the deadline for respondents due to the impact of the coronavirus pandemic until 30 June. CEO of Euronext, Stéphane Boujnah, told reporters earlier this year that it remains unclear if the initiative is relevant to markets in continental Europe, and warned that a shorter trading day could harm liquidity.

Investment managers, banks and agency brokers that responded to the LSE rejected the view that longer trading hours benefit liquidity. Most respondents agreed shorter market hours would in fact improve liquidity in the order book, but would not result in increased trading volumes.

Markets in Europe are currently open for business for 8.5 hours a day, much longer compared to the US and Asia where markets are open for 6.5 and 6 hours respectively.

Comparing Europe’s trading hours with the US, the Association for Financial Markets in Europe and the Investment Association highlighted that US market has six times the turnover than Europe, despite the shorter market hours. US markets also generally have lower trading costs and greater stability in liquidity conditions throughout the trading day. Both trade groups also previously said they would support a 12-month pilot on all major European exchanges to test the impact of the changes to market hours.

Elsewhere, market participants were asked to consider intraday auction activity as part of the consultation at the LSE, with a majority agreeing that the auction has not attracted liquidity as envisaged, but shorter market hours could serve to improve intraday liquidity. As a result of  widespread support, LSE confirmed it will discontinue the midday auction.

“London Stock Exchange will consider the issue further and continue to actively engage with stakeholders and industry bodies on this important issue, including to understand whether the current period of remote working due to the coronavirus pandemic has had any impact on their views,” the LSE’s spokesperson concluded.

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Euronext told market participants that they now have until 30 June to take part in the consultation, extending the initial deadline from 15 May after the consultation was officially launched at the end of March.

Euronext has encouraged respondents to share their experience of life in lockdown, specifically the changing working environment and habits that could be leveraged to improve work life balance and mental health issues among market participants. Those who have already responded to the consultation will also be allowed to modify their responses.

The consultation from Euronext follows calls from the Association for Financial Markets in Europe (AFME) and the Investment Association last year to review European trading hours. Both groups argued that a shorter trading day will not only improve intraday liquidity for more efficient markets, but it could also spur diversity across the industry and improve the wellbeing of traders.

Market hours in Europe are currently open for business for 8.5 hours a day, much longer compared to the US and Asia where markets are open for 6.5 and 6 hours respectively. The London Stock Exchange Group also launched a consultation on the issue, which AFME and the Investment Association responded to, suggesting that European market hours are reduced by 90 minutes.

“A shorter trading day would not only improve market structure but would also go a long way towards building a more diverse trading floor and fostering better mental health,” April Day, head of equities at AFME, has previously said. “Equities trading risks lagging behind a wider financial services industry push for more diversity and inclusion unless the long trading day is tackled by an industry-wide approach.”

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“I suspect a lot of people will be reverting back to high-touch as a means of gaining market intelligence and market execution intelligence, in terms of how to navigate this market,” Ellis says, noting the market downturn. “Perhaps drawing back from their low-touch channels.”

As he’s joined by the traders working alongside him on the equity desk, it becomes clear quite quickly that execution at T. Rowe Price is a team effort. Nicholas Wilkes and Mark Muschamp, senior equity traders, as well as Richard Pinnington, equity trader, and Evan Canwell, equity trader and market structure analyst, each have certain skillsets that cater to the evolving needs of the firm’s trading desk.

There’s a bit of a theme there,” Ellis says. “Richard was the first to join the trading desk in 2010 from a portfolio modelling background, but very much learning that from a high-touch basis like the rest of us. We reverse engineered into electronic, low-touch and systematic trading. Mark also started out in portfolio modelling and joined the team around the same time I took over the trading desk. He oversaw our first attempt at systematic trading and our first step into electronic execution channels. “We were early adopters of electronic trading and have continued to increase our understanding and engagement since.”

Ellis is a veteran of T. Rowe Price, having been with the investment manager since 2000. He started his career in 1982 with defunct stockbroker, Scrimgeour-Kemp Gee, writing out prices on the boards on the floor of the stock exchange. He moved into foreign exchange and fixed income trading at Lloyds Investment Management, which would soon become Hill Samuel, several years later, before his move to T. Rowe Price to become an equity trader.

He and the equity trading desk at T. Rowe Price are celebrating their recent win at The TRADE’s Leaders in Trading ceremony in November. Following an industry-wide vote, T. Rowe Price came out on top to win one of the biggest awards of the evening, the coveted ‘Trading Desk of the Year’ award, up against BlackRock, JP Morgan Asset Management and Legal & General Investment Management. 

“We were the lucky recipients of The TRADE’s Trading Desk of the Year award recently, and I think that reflected the work that the team is doing here day in, day out,” adds Ellis. “I have a strong belief in hiring the best talent we can find and letting them flourish. They bring different skillsets to the desk. If you are open to listen, then you will improve your processes. We are a well  integrated execution team, reflective of our entire global trading platform focusing on delivering best execution for our clients.”

Valuable partnerships  

Like most asset managers, the equity trading desk at T. Rowe Price is navigating the evolving complexities of the equity execution landscape. The shift driven by MiFID II in Europe saw new venues come to the light, as buy-side traders were compelled to place more focus on best execution requirements. The equity traders at T. Rowe Price agree that this development has been a positive one in the long-run, allowing the firm to fine-tune its execution processes.

“It’s a constant evolution of knowledge – it doesn’t stand still,” says Wilkes. “It’s continually learning and adapting your thought and trading processes to incorporate that. We have a strong dialogue with counterparties and that’s across the industry, from bulge-brackets to agency brokers. It’s important to know what they are thinking and how they are going to move forward.

“We are very mindful of the fact that the trading environment today won’t be the same as the trading environment in two, three or five years. The way that you interact with the market now will have an impact on that. It’s all well utilising liquidity here and there, but you have to be mindful of the relationships because it can be to your clients’ detriment. If it’s a strong market place in five years, and the relationships with the brokers are still strong, the liquidity lines will still be there.”

As automation, innovation and technology continue to sweep institutional trading, T. Rowe Price places a lot of value on its relationships. Ellis adds that the desk views those relationships more as valuable partnerships. Whether it’s a large US investment bank, or a boutique broker, the traders place emphasis on nurturing those partnerships at various levels to ensure they can make the most of opportunities as they arise.

Being an active, liquidity seeking investment firm with $1.2 trillion of assets under management, T. Rowe Price needs options on trading institutional-sized flow, and this ultimately comes down to those all-important relationships. But the landscape has not been kind to banks and brokers, which now seem to be shedding headcount across trading divisions on a systematic basis to deal with rising costs of operation and declining profits.

“We’re very conscious of the challenging environment for the sell-side, and we have felt it deeply,” Ellis explains. “For me, last year was probably the worst year that I have seen in my career in terms of high-profile departures and people being cut. Some of those people we knew very well in the industry, and they were very good at their jobs.”

“However, there was a direction of travel in terms of how brokers were developing their own model and that was well understood. We felt there was inevitability about some of the cuts and the areas where that tends to happen and had prepared ourselves accordingly. Brokers have had to focus on where their value proposition is. Like everybody else, they are having to produce more with less.”

In the context of coronavirus as we all speak, and Ellis’ reference to market participants reverting to high-touch, it’s understandable that relationships are the forefront of the focus for his team. It can be a headache for buy-side firms like T. Rowe that place a lot of emphasis on their counterparties, but ultimately, it puts the business in a good position.

“Jeremy has probably been working more closely with the brokers recently because of the turnover we’ve seen the industry,” Pinnington adds. “He has had to field those calls when someone is let go, and deal with the ramifications of that in terms of maintaining those relationships. If you lose someone that has been covering you for 10 years, then you need to make sure you find the right person to take their place. Relationships are at the core of what we do, so it is incumbent on us to ensure we find the right fit and do our bit to make the relationship work.”

Direction of travel

While relationships are at the core of the execution team’s processes at T. Rowe Price, automation and technology play an equally important part. Canwell oversees the systematic side of the business with a segment of flow already completely automated. He recently led the development of the asset manager’s routing system which acts similar to an ‘algo wheel’. The automated system uses the firm’s internal data to check each and every order that comes in, before it is sent to the most suitable broker.

“We have a subset of flow that is completely automated, from the portfolio manager sending the order down, right through to compliance and execution,” Canwell says. “It’s all done automatically and sent out to the broker using our internal TCA, which we are constantly feeding with data to make it smarter. Our approach is using a lot of characteristics that inform algo wheel decisions, but we implement that human overlay given our active strategy.

“Some may say you should switch off the underperforming algo providers for a period of time but we wonder whether that reduces the ability to explore changes to platforms and improvements through investment cycles. We believe if you have the bandwidth and understanding of those platforms it is important to have your options open from a best execution perspective.”

In a post-MiFID II world, Canwell continues that everything has become more detailed, meaning there is far more to get to grips with. When considering technology, T. Rowe Price tends to focus on its core business and ensuring those processes are as efficient as they can be.

As Canwell indicates, a lot of the development is also undertaken internally. Ellis is currently working alongside Muschamp to develop a live trading dashboard that merges various systems to provide a real-time picture of the landscape for informed trading decisions. 

“The focus there is to build the dashboard with a 10-year view,” Muschamp explains. “This is the first step, but we want to be able to evolve so that as the environment changes we can do more in that moment. We have lots of systems that you have to aggregate on daily basis, but if you get all of those in one place, it’s more consistent. You can then build on that rather than adding an entirely new system.”

“We don’t turn down many meetings, put it that way,” adds Pinnington. “If a vendor comes in and we haven’t heard of them, we don’t immediately say no. We listen to what they have to say so that we aren’t missing trends. We have long-standing relationships with many of partners that provide us with a different or unique approach to markets.”

Intense role

The industry’s recent bid to shorten market hours has taken the buy-side by storm in recent months. European markets are open for business for 8.5 hours a day, much longer compared to the US and Asia where markets are open for 6.5 and 6 hours respectively.

It’s thought that shorter market hours would spur recruitment of more diverse talent, while easing the strain that traders bear when working such long hours. But behind the scenes, intraday liquidity is drying up as trading volumes shift towards the most important liquidity event of the day, the closing auction.

Jeremy Ellis, head of European equity trading, T. Rowe Price

“The industry has complained about liquidity and lack of depth in the midday lull when markets open, before ramping up for the close,” says Muschamp. “There’re ways to work around that but it’s not ideal conditions. We agree with the business case for shortening market hours, but it’s a more positive development in terms of the push for greater diversity and emphasis on well-being.”

Like many firms in the industry, T. Rowe Price responded to the London Stock Exchange’s consultation on shorter market hours, very much in favour of the efforts. While the benefits to market structure and the liquidity landscape are clear, the asset manager’s traders point to the well-being and mental health of those in the industry as a central cause, alongside the need for diversity.

The traders agree that the role of the buy-side trader is indeed intense.

“It’s intense every minute of the day, right? It’s the consistent working hours, which goes back to the shorter market hours issue,” says Wilkes. “It will have a hugely positive impact on our industry in terms of well-being. It’s demanding to have to concentrate on the job every minute from 6.30am and there’s no let-up. It’s a continuous challenge of the role.”

On diversity, T. Rowe Price is working on a ‘Women in Investments’ project and has a business resource group for women across the firm. Wilkes and Ellis both also sit on various diversity committees exploring the issue further. Ellis is mentoring people outside of the industry as part of the 30% Club scheme, which he says has been eye-opening in terms of getting a different perspective.

“We are conscious that the photos for this interview may not necessarily back up how seriously we view diversity, but I think the message is that we are getting better and better at our diversity efforts across the firm as a whole,” Ellis explains.

“It’s central to the company. While we may not look diverse, that doesn’t mean we can’t proactively understand the issue and have a positive impact to the broader company. That’s where we are coming from at this stage. As I look around, I see a lack of egos in this firm and that goes right up to senior management who are approachable and engaged in the business.”

Looking to the future, Ellis and his team concur that the buy-side must provide relevance and value to clients, which T. Rowe is confident it is aligned to deliver. But this is a constant evolution that the desk needs to keep on top of, from the investment side, market structure, regulation and execution. At the same time, the battle for diversity continues as increased automation across the industry shifts the role of the buy-side forever.

“In the future, there will be more layers of automation and the next hire to the execution team will have a lot more of Evan’s skillset than mine,” Ellis explains. “There are firms out there where execution is becoming more operationalised, or TCA-led, but that’s certainly not the case here. The need for liquidity requires a more nuanced approach than purley led by TCA. Not all asset managers are created equally, as an active manager we need to find solutions that both scaleable and accommodate multiple challenges.”

“We’ve also heard discussions around outsourced trading, with quite a defensive response from the buy-side, similarly defensive to the reactions we saw to MiFID I, MiFID II and high-frequency trading. I’m sure there is a use case for outsourced trading for smaller asset managers, and possibly some of the larger asset managers, but that sort but that sort of innovation will continue to come through. If there’s one thing my career so far has taught me, and the team here will agree, it’s that you must evolve with the business.”

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Market participants were sent the consultation early this week, following calls from the Association for Financial Markets in Europe (AFME) and the Investment Association last year to review European trading hours. Traders have until 15 May to provide feedback to Euronext.

Euronext confirmed last month it would launch a consultation on the issue, following the London Stock Exchange Group (LSEG), which launched its own consultation in December on reducing trading hours in European markets.

Chief executive of Euronext, Stéphane Boujnah, also told reporters last month that it remains unclear if the proposal for shorter trading hours, which came from London, is relevant to markets in Continental Europe. He also reiterated that all major exchange groups across Europe would need to support the idea if it is to move forward.

AFME and the Investment Association have argued that a shorter trading day will improve intraday liquidity for more effective markets, but also that it could spur diversity across the industry and improve the wellbeing of traders. The debate has been met with widespread approval across the industry.

“It’s high time we end the long hours culture, which is detrimental to diversity and mental health, and inefficient for the markets,” Galina Dimitrova, director of capital markets for the IA, said in January. “The current long hours culture impacts on traders’ mental health and wellbeing. It has also been identified as a key obstacle in recruiting and retaining more diverse talent.”

Both trade associations responded to the LSEG consultation, stating that reducing European market hours by 90 minutes would create more efficient markets to the benefit of investors and savers. European markets are currently open for business for 8.5 hours a day, much longer compared to the US and Asia where markets are open for 6.5 and 6 hours respectively.

European market hours should be changed from 8am-4.30pm to either 9am-4pm or 9.30am-4.30pm GMT, AFME and the Investment Association said, and they would support a 12-month pilot on all major European exchanges to test the impact of the market hour changes.

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Representing both major banks and asset management firms, the Association for Financial Markets in Europe (AFME) and the Investment Association (IA) are continuing their campaign for shorter trading hours in a bid to improve the wellbeing of traders and drive diversity across the industry.

Both trade groups have argued in their response to the LSE’s consultation, due to close on 31 January, that reducing European market hours by 90 minutes would create more efficient markets to the benefit of investors and savers.

European markets are currently open for business for 8.5 hours a day, much longer compared to the US and Asia where markets are open for 6.5 and 6 hours respectively.

Comparing Europe’s trading hours with the US, AFME and the IA highlighted that despite the shorter trading day, the US market has six times the turnover than Europe, alongside generally lower trading costs and greater stability in liquidity conditions throughout the trading day.

“We believe that a shorter trading day will improve liquidity in Europe as, rather than being thinly spread over an extended period of time, trades will be more evenly distributed over a shorter trading day,” said April Day, head of equities at AFME. “This will create more effective markets, reducing trading costs for market participants and investors.”

AFME and the IA are calling for European market hours to be changed from 8am-4.30pm to either 9am-4pm or 9.30am-4.30pm GMT. Both said they would also support a 12-month pilot on all major European exchanges to test the impact of the market hour changes.

“It’s high time we end the long hours culture, which is detrimental to diversity and mental health, and inefficient for the markets,” Galina Dimitrova, director of capital markets for the IA added. “The current long hours culture impacts on traders’ mental health and wellbeing. It has also been identified as a key obstacle in recruiting and retaining more diverse talent.”

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In the consultation, LSE outlined that the move could encourage staff diversity, concentrate liquidity in a shorter time frame, and positively impact mental well-being of staff following broad support from trade and industry groups.

On potential impacts of shorter trading hours, LSE said it would require changes to regulatory reporting and commitments for trading on systematic internalisers and OTC, while reducing the important overlap with US and Asia trading hours. LSE also highlighted that to maximise the potential benefits, all main European trading venues would have to agree to shorter hours.

Market participants have been given five options in the consultation on the possible changes to equity trading hours, including between 08:30 – 15:30, 08:30 – 16:00, 09:00 – 16:00, 09:00 – 16:30, or to maintain the current time of 08:00 – 16:30 London time. The consultation will close on 31 January 2020.

European markets are open for business for 8.5 hours a day, much longer compared to the US and Asia where markets are open for 6.5 and 6 hours respectively.

The Association for Financial Markets in Europe (AFME) and the Investment Association said in a letter to the LSE last month that longer hours have impacted traders’ mental health and well-being. It has also been identified as an obstacle in recruiting more diverse talent.

“A shorter trading day would not only improve market structure but would also go a long way towards building a more diverse trading floor and fostering better mental health,” said April Day, head of equities at AFME. “Equities trading risks lagging behind a wider financial services industry push for more diversity and inclusion unless the long trading day is tackled by an industry-wide approach.”

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