The New York Stock Exchange is polling market participants on the benefits of trading stocks 24 hours a day, while regulators consider an application for the first 24/7 exchange.
The survey by the NYSE, part of Intercontinental Exchange, was carried out by its data analysis team rather than management, but it highlights the growing interest in trading stocks like Nvidia or Apple overnight between 8 p.m. and 4 a.m. Eastern Time.
The issue has become a hot topic in recent years, in part due to the 24/7 operation of cryptocurrency trading and the increase in retail investor activity, spurred for the first time by related lockdowns. to the coronavirus pandemic.
Stock exchanges have become somewhat of a laggard in a world where other major markets, including U.S. Treasuries, major currencies and leading stock index futures, can be traded 24 hours a day, from Monday to Friday.
Several retail brokerages, including Robinhood and Interactive Brokers, now offer 24-hour access to U.S. stocks with trades either matching their in-house holdings or conducted through a dark pool trading platform such as Blue Ocean, where stocks are often traded with Asian retailers. investors in their time.
A night exchange, however, would constitute a step change in how late trading is viewed due to its heavy regulatory oversight compared to dark pools. Exchanges are directly supervised by the Securities and Exchange Commission and tested for stability and security and require approval to change the rules.
Transactions on exchanges are also part of the consolidated band of official trading price records, meaning nightly activity would be more likely to set the tone for normal trading hours.
The NYSE survey asked respondents whether they thought 24-hour trading should take place on weekends as well as during a five-day week, how investors should be protected against price fluctuations and how respondents would organize the night sessions.
It was also asked whether people agreed that time spent thinking about day-to-day trading would be better spent trading during normal market hours.
The investigation comes as startup 24 Exchange, backed by hedge fund Steve Cohens Point72, seeks SEC approval to launch the first 24-hour exchange. This is 24X's second attempt, which withdrew its proposal last year due to operational and technical problems.
As of Friday, no letters had raised issues with 24X's latest proposal. The SEC has several months to review the plans.
I have no idea how loud they're going to be in the middle of the night. But it's really not up to the SEC to decide whether it's commercially viable or not, said James Angel, a finance professor at Georgetown University who filed a letter supporting the 24Xs plan.
I am in favor of letting the market decide. If it succeeds, everyone will be better off and if it doesn't, well, investors will lose the trades.
The committee that oversees the consolidated band has begun meeting, according to two sources, to consider issues related to the move to 24-hour exchanges, including who should bear the costs. Clearinghouses, which help settle transactions, also operate on set hours.
Institutional interest in overnight trading has been muted due, among other things, to the relatively low liquidity on offer and concerns about settlement risk.
Current night owl offerings only allow retail traders to place limit orders in which they indicate the price at which they would buy or sell. If these conditions are not met, the order expires, unfulfilled, the next morning.
There is demand for 24-hour trading, but it does not necessarily come from the broader market, said one institutional broker, who warned that core staffing could prove another thorny issue.
Things already happen outside of normal hours and you have to account for that to some extent, but that's very different from something that happens to, say, Apple at 2 a.m. or even 4 p.m. SATURDAY. What do you do then?
