The London Stock Exchange building. Picture: REUTERS/TOBY MELVILLE
The London Stock Exchange building. Picture: REUTERS/TOBY MELVILLE

Most UK stock market participants want a reduction in the world’s longest trading hours, which they say can improve liquidity and industry diversity, according to the results of a London Stock Exchange (LSE) survey.

“A significant majority of respondents were sympathetic to the arguments that a reduction of market hours could lead to improvements in diversity and wellbeing,” the LSE said as it released the outcome of its consultation, without disclosing the percentage of those favouring shorter hours.

Most of the more than 140 respondents said any change would need a unified approach across European exchanges and other trading venues, according to the LSE. In light of this, the bourse said it will wait for the results of other European exchanges’ surveys on market hours, which at eight and a half hours exceed the US by two hours.

The results of the consultation lend weight to a proposal by two professional bodies to shorten European market hours. The reasons include the concentration of liquidity in the first and last hours of trading, the short time window between corporate news releases and the market opening, and the need to improve the work-life balance and diversity at financial firms. The Association for Financial Markets in Europe and the Investment Association of UK asset managers asked bourses in November to consider cutting 90 minutes from their trading day.

The LSE survey was conducted in December 2019-January 2020, with respondents ranging from individual investors through to global investment banks. The exchange said it will also monitor whether the period of remote working due to the coronavirus pandemic has altered any views on shorter trading hours. Lobby groups for the industry have previously said they would support a 12-month pilot across all major European exchanges and trading venues.

The majority of those surveyed favoured a 9am-4pm trading day, which would mean a one-hour delay to the open and a 30-minutes earlier closing time. Some advocated for both 9am-4.30pm and 9.30am-4.30pm working days. A minority advocated leaving hours unchanged, the LSE said.

Even if trading hours were reduced to seven hours, as favoured by most respondents, the European trading day would still be longer than in the US and Japan and would overlap with US markets. Most respondents in the survey didn’t consider the overlap with Asian market hours to be as important as that with US market hours.

While the majority said shorter hours would improve trading velocity and liquidity on the order book, “very few” believe this would result in an increase in trading volumes, according to the LSE.

The capitalisation of the Stoxx Europe 600 Index is about half that of the S&P 500 and the average turnover in the European benchmark in the past 12 months is about 40% lower than on Wall Street.

An informal Bloomberg News survey in February showed that across Europe, 74% of finance professionals, including traders, analysts and fund managers, favour reducing the length of the stock market day.

Bloomberg