“NYSE Explores 24-Hour Trading Views”

The New York Stock Exchange (NYSE), a division of the Intercontinental Exchange, is surveying market players about the effectiveness of implementing 24-hour stock trading as authorities examine a proposal for the first all-day exchange. The questionnaire, conducted by NYSE’s data analytics team instead of its executive team, underscores increasing interest in trading major companies like Nvidia or Apple after normal market hours, from 8pm to 4am Eastern time.

In recent times, continuous trading has grown in importance, partly due to the rise of cryptocurrency trading and increased retail investor activity triggered by Covid-19 lockdowns. Stock exchanges appear to be trailing behind in a world where other significant markets such as US treasuries, major currencies and leading stock index futures operate around the clock from Monday to Friday.

Several retail brokers including Robinhood and Interactive Brokers now provide 24-hour weekday trading for US stocks. These transactions are either paired with their internal assets or are carried out via ‘dark pool’ exchanges such as Blue Ocean, where shares are typically traded with Asian retail investors during their daytime.

Nevertheless, introducing an overnight exchange could revolutionize late trading due to its strict regulatory supervision contrasted with dark pools. Exchanges are directly monitored by the Securities and Exchange Commission, and their stability and security are tested, along with any changes to their rules needing approval.

Moreover, transactions on exchanges are included in the consolidated ‘tape’ – the official record of trading prices, indicating that after-hours trading could influence the trend for daily trading. The NYSE’s survey inquired if respondents believed that trading should also be available on weekends, how investors might be shielded from price fluctuations, and how they might manage staffing during the after-hours session. The survey also sought opinions on whether the focus should remain on traditional trading hours rather than night-time exercises.

The start-up 24 Exchange, which currently has the backing of Steve Cohen’s Point72 hedge fund, is about to launch their first perpetual exchange process. This proposal has been submitted to the SEC for approval, following their withdrawal last year due to some technical and operational difficulties. To date, there is no known opposition raised against the recent submission by 24 Exchange.

The SEC has ample time to review these plans. Georgetown University’s finance lecturer, James Angel, does not consider the potential trading volumes in the middle of the night, stating that the SEC’s job isn’t to decide its commercial viability. Asserting his support for 24X’s plan, he believes that the market should be the one to decide. If the submission is successful, it would be beneficial for everyone and if it’s unsuccessful, the exchange’s investors will face the loss.

The consolidated tape’s managing committee has started discussions to find out the ramifications of transitioning to 24-hour trading. This debate includes deciding who will bear the burdens. Trading encounters a few obstacles during the night, such as limited liquidity and settlement risk, which cause institutional investors to hesitate to trade overnight.

Existing after-hour trading options allow retail traders to establish ‘limit’ orders, where they specify the buying or selling rate and if the rate is not matched, the order will expire the following morning, unfulfilled.

One institutional broker points out that although there’s a demand for 24-hour trading, not everyone in the marketplace is in favour of it and warned of possible issues related to staff management. He added that monitoring activities outside standard trading hours is distinctly different from having to manage an issue arising at unconventional hours. The broker exemplifies coping with an event related to Apple at 2 am or 4 pm on a Saturday, probing the question of how to respond in such situations. – Copyright The Financial Times Limited 2024.

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