The New York Stock Exchange (NYSE) is currently engaging market participants in discussions about the potential benefits of transitioning to 24/7 stock trading. This move comes as regulatory bodies examine an application for establishing the first round-the-clock exchange. Conducted by the NYSE's data analytics team, a subsidiary of the Intercontinental Exchange, this survey explores the burgeoning interest in facilitating overnight trades of major stocks like Nvidia or Apple, mainly between 8 pm and 4 am Eastern time.
This interest has been sparked by several factors, including the continuous operation of cryptocurrency markets and a surge in retail investing prompted by COVID-19 lockdowns. Traditionally, stock exchanges have lagged behind other significant markets—such as US Treasuries, major currencies, and leading stock index futures—adopting continuous trading from Monday through Friday.
Retail brokers like Robinhood and Interactive Brokers have already offered 24-hour weekday trading for US stocks. These trades are matched internally or executed through "dark pool" trading platforms like Blue Ocean, popular with Asian retail investors during daytime hours. However, an overnight exchange would represent a significant evolution in late trading practices due to its stringent regulatory oversight, in contrast to the less regulated dark pools.
US exchanges operate under the direct supervision of the Securities and Exchange Commission (SEC), requiring rigorous testing for stability and security and approvals for any rule changes. Additionally, exchange trades are included in the official consolidated "tape" of trading prices, thus potentially influencing the opening trends for regular trading hours.
The NYSE's survey probes into whether continuous trading should extend over weekends and weekdays, how to safeguard investors from volatility, staffing for overnight sessions, and if focusing on overnight trading might detract from traditional market hours. This inquiry coincides with 24 Exchange's bid for SEC approval to launch a 24/7 exchange following a previous withdrawal due to operational challenges.
As the SEC reviews the proposal, the future of overnight trading remains uncertain, with discussions on who would bear the costs and how trades would be settled outside traditional operating hours. Despite some scepticism regarding liquidity and settlement risks, especially from institutional investors, there is a clear interest in exploring 24-hour trading, albeit with considerations like staffing and management of out-of-hours events.
The move towards a 24/7 trading environment reflects a broader shift towards accommodating global trading demands and the evolving preferences of modern investors, suggesting a significant transformation in how stock exchanges operate and how investors engage with the market.
