Is 24/7 trading really on the cards?

by Guy Melamed, CEO at Exberry

May 30, 2024

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We could potentially be seeing a transformative shift in the world of financial markets, as the New York Stock Exchange (NYSE) seems to seriously be considering 24/7 trading. NYSE’s data team recently released a survey assessing the demand and feasibility of such a model, with questions focusing on preferences for overnight trading, investor protection and operational staffing. Long the domain of cryptocurrencies, 24/7 trading would signal a significant step towards aligning stock trading with the global, round-the-clock nature of modern economies.

 

The Driving Forces Behind 24/7 Trading

Global markets have evolved; major stocks such as Apple, Amazon, and Microsoft are already traded worldwide, reflecting the global demand for access at all times. US Treasuries, major currencies and stock index futures are already traded on a 24/5 basis. Retail brokers like Robinhood and Interactive Brokers have tapped into this demand by offering 24-hour weekday trading through internal matching or dark pools. Not unnoticed by some is NYSE’s timing. Steve Cohen-backed startup, 24 Exchange, is now seeking SEC approval for a 24/7 exchange, highlighting the growing momentum towards continuous trading.

 

Is it worth it?

A key concern with transitioning to 24/7 trading, however, is the risk of increased price volatility during off-peak hours when trading volumes are lower. This could result in significant price swings, potentially harming less experienced investors. The NYSE survey specifically probes mechanisms to protect investors from such volatility, highlighting the need for robust safeguards.

Operational and logistical complexities also pose significant hurdles. Staffing for overnight sessions is a major concern, as is the need for a robust technical infrastructure to support continuous trading. Clearing houses, which currently operate within set timeframes, would require substantial changes to accommodate a 24/7 model. This would necessitate a major overhaul of the entire financial ecosystem.

 

A democratisation of trading

On the other hand, moving to a 24/7 trading model aligns with the needs of global, interconnected markets. Continuous trading would allow investors worldwide to engage with the market at times convenient to them, enhancing market efficiency and liquidity, while potentially reducing the volatility seen at market openings. 

Furthermore, some analysts suggest that implementing 24/7 trading could diminish the volatility often experienced during market openings. By allowing news and events to be promptly factored into stock prices, this approach could create a more stable and predictable trading environment, offering advantages to all market participants.

 

A revolution towards responsivity 

As the financial world approaches what could be a revolutionary change, 24/7 trading would make markets more responsive and inclusive, fitting the demands of the digital age. Achieving this, however, would require regulatory approval, overcoming operational challenges, and ensuring sufficient liquidity to open 24/7 to cover a trading venue’s margins. 

If realised, this shift could usher in a new era of market operations. Yet, it goes without saying that underscoring this potential move would demand extremely robust tech infrastructure to support the 24/7 model.

Recent European Elections and Their Implications on Capital Markets

The elections for the European Parliament, held between 6th and 9th of June, could end up significantly impacting capital markets on the continent. This juncture could have the effect of reshaping regulatory landscapes, influencing market stability and altering cross-border economic activities.

ConFEAS 2024: A Growth Strategy for Exchanges

I’ve recently returned from the ConFEAS 2024 conference in Samarkand, Uzbekistan. The location, right at the heart of the ancient Silk Road, together with the conference gathering of international stock exchanges and market actors, perfectly illustrates how modern markets meet the past

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