The London Stock Exchange (LSE.L) is considering a shorter trading day in response to calls to make City trading more inclusive and efficient, and improve wellbeing of traders.
The LSE said it intends to start a formal consultation to review its operating hours.
The LSE currently operates from 8am to 4.30pm clocking in 8.5 hours. This is the same across most European exchanges, prompting a call for Europe-wide review into trading hours.
Two major trading bodies asked the LSE in a joint letter on Thursday to cut 90 minutes and shorten the opening time to 9am to 4pm.
“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, managing director, head of equities at the Association for Financial Markets in Europe (AFME).
The AFME and and the Investment Association (IA) urged the LSE to review market opening hours across Europe, with a view to shortening it to 9am to 4pm GMT.
They said a reduction of 90 minutes would create more efficient markets, benefiting savers and investors. Currently, the first hour of trading often attracts little liquidity and subsequently is a more costly time to trade, while the final hour attracts about 35% of total daily volume.
Shortening the hours would concentrate liquidity leading to more consistent trading costs and provide more time for traders and the market to digest corporate announcements.
Both AFME and IA also emphasised on the impact of shorter trading hours on improving diversity on trading floors, suggesting such a move would encourage women and those with care responsibilities in particular.
“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,” Day said.
Most stock exchanges in Europe currently operate for 8.5 hours compared with those in the US, including NYSE and NASDAQ that have trading day of 6.5 hours, and 6 hours for those in Asia.
AFME and IA said long hours culture impacts on traders’ mental health and wellbeing, and has also been identified as a key obstacle in recruiting and retaining more diverse talent, in particular for those with family or care commitments.
“From boardrooms to trading floors, we need to improve the ways our businesses work to create more inclusive environments where all employees can thrive. Shortening trading hours, enabling a better work-life balance could bring significant benefits to City workers and firms,” said Galina Dimitrova, director of Capital Markets at the Investment Association.
“We have heard many deeply moving stories of traders’ mental health and personal life being impacted by their working hours. We hope this European-wide review could start to lead to a step change in more efficient markets to the benefit of savers and those who operate them.”
The LSE said it supports the move.
“We strongly support improving diversity and workplace culture across the City. AFME and IA, groups representing a wide range of our customers, have made an important suggestion for a European-wide adjustment to trading hours.
“We intend to consider the request in a formal consultation with London Stock Exchange’s global members and customers,” said a spokesperson for the London Stock Exchange Group.
Ben Springett, head of European electronic and program trading at financial services group Jefferies said: “A coordinated shortening of the European trading day would provide a number of benefits. As co-chair of Jefferies Women’s Initiative Network, I have spent a significant amount of time understanding the challenges that a long trading day presents for people managing their work-life balance, and a reduced duration would naturally make this easier.
“From a liquidity perspective, compressing a day’s trading into a shorter timeframe should improve efficiency and potentially reduce transaction costs. The overlap with the US market is most valuable, so any changes would likely be more directed at a later start time.”