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How extended trading will affect investors

The New York Stock Exchange on Thursday plans to begin two daily, after-hours sessions designed to capture a chunk of the computerized trading that is changing world markets. Here are some questions and answers about off-hours trading and how it will affect big and small investors.

Q: Will the new trading change the NYSE's hours?

A. Yes. The after-hours sessions will run simultaneously, stretching the end of the Big Board's day from 4 p.m. to 5:15 p.m. The NYSE's 9:30 a.m. opening will not be affected by the new sessions.

Q: Will trading be conducted differently after hours?

A. The mechanics of trading before and after 4 p.m. will be very different. For one thing, the off-hours sessions will be conducted off the floor of the exchange, bypassing the specialists who run the NYSE's auction-style market for stocks during regular hours. In addition, trading will be limited to individual stocks at the closing prices established at 4 p.m., or big baskets of multiple stocks with an aggregate price.

Such transactions, made at fixed prices or in pre-arranged packages, are sometimes referred to as "crossed sales," hence the official names for Crossing Session I and II.

Q: What's the difference between the two sessions?

A. Individual stocks will be traded in the first session, which runs from 4:15 p.m. to 5 p.m. In the second session, running from the 4 p.m. closing bell to 5:15 p.m., stocks will be traded in baskets, or portfolios containing a minimum of 15 NYSE stocks with a value of at least $1-million.

Q: Who can participate and how?

A. Both individual and institutional investors may trade after hours.

Individuals will have access only to the first crossing session. Two kinds of trades will be conducted: matched and unmatched.

Matched trades will be entered into the stock exchange's computers with pre-arranged buyers and sellers. Unmatched orders will line up in the computer and be executed only if there is a corresponding order to buy or sell. Single-sided trades that do not find a match will expire, or be carried over to the next day at the customer's request.

For the first session, an investor can place orders through brokers as normal, but only at closing stock prices.

If matching orders to buy or sell at the closing price appear, the computer will execute the trades at 5 p.m. If trades do not match up they will be filled. There also may be partial matches. For instance, if there are bids to buy 1,000 shares of IBM and offers to sell 500 shares, 500 shares will be traded.

If brokerage firms pre-match orders, they automatically will be completed.

The second session is limited to program traders who want to execute basket trades. That session is designed to lure back trades now being done in London.

Q: How much can be traded?

A. Small orders of less than 100 shares, known as odd lots, will not be eligible unless they are pre-matched. Orders can be placed in 100-share increments, up to a maximum 99,900 shares.

Q: Why not just extend the regular hours of normal auction trading?

A. The NYSE says it doesn't need to extend the regular auction. The real competition is for crossed sales, which are now being siphoned away by overseas traders and electronic systems in this country. The second crossing session is particularly attractive because it will afford traders some of the anonymity they enjoy in London, where less public disclosure of transactions is required. In the second session, only the aggregate volume and dollar amount of all trades will be reported.

Q: Will the sessions change the closing stock prices that appear in the newspaper?

A. The Associated Press sends final closing prices to the St. Petersburg Times and other newspapers for publication. These show the final stock trade of the day, whether that trade occurs on the New York Stock Exchange or a regional exchange. Trades during the extended sessions will be reflected.

Q: Will after-hours business be included in total daily trading volume?

A. Yes. The crossing sessions will increase the total volume of stock activity for the day. The first session will add to the volume of individual issues. The second session won't break trading down by stock, but it will nevertheless add to the NYSE's overall daily volume.

Q: Companies routinely wait until after the stock market closes to make important announcements. What will happen now?

A. Companies are expected to delay important announcements until after 5:15 p.m. That will give traders and investors more time to assess the significance of the developments. If there is a major development at a company during the after-hours session, the NYSE can halt trading in that stock and return all orders.

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