NEW YORK (AP) -- ETrade Group said today it will offer individual investors access to after-hours trading through Instinet, the biggest market for buying and selling stock when traditional exchanges are closed.
The new service would make ETrade the biggest online brokerage so far to provide its customers with entry to a market that until recently was the exclusive province of money managers and institutional investors.By teaming with Instinet, a unit of Reuters PLC, ETrade is bringing its customers a possibly safer way to take part in a volatile market where stock prices can swing wildly due to limited demand. Instinet accounts for nearly 20 percent of the daily trading volume of stocks listed on the Nasdaq Stock Market.
Also, by contrast with newer electronic trading systems currently limited to Nasdaq stocks, Instinet will give ETrade customers after-hours access to New York Stock Exchange issues such as the 30 major companies in the Dow Jones industrial average and other big names.
ETrade customers will not, however, have round-the-clock access to Instinet trading like major investors do.
The after-hours session, expected to be introduced in September, will run for 2 1/2 hours following the regular 4 p.m. close of trading on traditional markets like the New York Stock Exchange and Nasdaq Stock Market. ETrade's regular commission rates will apply.
The move by ETrade follows the introduction of limited after-hours trading by online brokers Datek and Muriel Siebert, as well as an announcement by America Online that the world's biggest Internet service will be offering its 17 million members access to after-hours trading through Wit Capital later this year.
Some experts worry that individual investors will get hurt by the sharp price swings often seen in after-hours trading due to limited demand. For that reason, most of the brokers linking up with after-hours trading are requiring investors to name a specific price at which to buy or sell a stock.
Several of the new after-hours systems boast major partners, all of them trying to get in on the ground floor of a new market they hope will be as explosive as online trading.
ETrade and Instinet are both partners in a new trading network named Archipelago, along with Goldman Sachs and J.P. Morgan. Goldman Sachs also owns a stake in Wit Capital.
Last month, brokerages Fidelity Investments, Charles Schwab, and Donaldson, Lufkin & Jenrette formed a joint venture with Spear, Leeds & Kellogg to create a new electronic market. Datek's after-hours trading is conducted by its Island ECN subsidiary, which is partly owned by Waterhouse Investor Services.
All the impending competition has prompted the NYSE and the Nasdaq Stock Market to announce that they'll introduce their after-hours trading sessions sometime next year.
ETrade, based in Menlo Park, Calif., has been moving aggressively to become an all-in-one online financial services shop. The company recently entered the online banking business with the acquisition of Telebanc.