Shorter market hours bid hits wall as Euronext rejects proposal

Euronext confirms it has no intentions to change its market hours due to lack of consensus from market participants and little evidence on the benefits.

Pan-European exchange operator Euronext has said it has no intentions to modify the hours of its markets following an industry consultation on the proposal to reduce the trading day.

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.