Oslo Børs To Cut Opening Hours In Bid To Increase Volumes
Oslo Børs, the Norwegian stock exchange, is cutting its trading hours in a counterintuitive move to win back lost volumes.
The bourse will shut its equity and derivatives markets an hour earlier than normal from August 6 for a six-month trial period in a bid to concentrate trading. The Norwegian exchange said that volumes had fallen since it extended its hours in September 2008, as a result of increased competition and challenging market conditions, with trading usually focused early and late in the day.
“After dialogue with market participants, we believe that reduced opening hours will contribute to concentrated trading and thus to higher quality in the order book during the day,” said Bente A. Landsnes, president and chief executive of Oslo Børs. “This may also attract new volume. We consider this positive for both market participants and market competitiveness.”
Oslo Børs’ move to shorten its opening to hours—the exchange will now close an hour earlier at 4.30pm— could be seen as a reaction to the growth of high-frequency trading in Europe.
It is thought that over half of all daily equity trading in Europe is now done by algorithmic practices. HFT firms like exchanges to be open as long as possible to be able to quickly react to changing market events, while more traditional institutional investors normally do not necessarily need extended exchange opening hours to execute their more long-term plays.
Oslo Børs has also become one of the first European exchanges, following the lead of Italy’s Borsa Italiana, to penalize high-frequency traders by saying it will, from September 1, impose a fee on members that cancel a high proportion of their orders.
“Oslo Børs takes the view that high order activity is not in itself necessarily negative for the market, but we are keen to encourage a situation in which all types of trading contribute to maintaining confidence in the marketplace,” said Landsnes in May.
The Norwegian exchange also believes that shortening its trading day will not only improve liquidity but will also allow companies more time outside of trading hours to focus on fundraising activities.
“Time windows companies have to raise capital are becoming ever shorter as a result of the turbulent market conditions,” Oslo Børs said in a statement. “Oslo Børs has recently launched an offer of ‘fast track’ listing of new companies to remedy this situation. Shorter opening hours will further strengthen the primary market in Oslo and create an advantage for companies that are listed or plan to be listed in this market.”
Since the original Markets in Financial Instruments Directive (MiFID) was launched in 2007 by the European Union, which brought about increased market fragmentation to the exchange space, Oslo Børs now faces added competition from alternative trading venues such as Bats Chi-X Europe, Turquoise and Nordic-only platform Burgundy, as well as from Nasdaq OMX Nordic’s Stockholm market.
Clearstream joined the settlement platform last month.
The UK government is due to trigger Article 50 on March 29.
Platforms are expected to consolidate down to two providers.
Is this a structural trend ?
80% of volumes have joined the settlement platform.