The Financial Times reported on Monday (April 22) that the NYSE is surveying market participants about "24-hour trading." The UK media explains that the discussion is partly motivated by the round-the-clock trading of cryptocurrencies and the increase in retail investor activity triggered first by the COVID-19 lockdowns.
The survey, conducted by the exchange's data analytics team rather than its management, highlights the growing interest in overnight trading of companies like NVIDIA and Apple between 8 PM and 4 AM Eastern Time.
In recent years, this issue has become a hot topic, partly due to the 24-hour operation of cryptocurrency trading and the boost in retail investor activities prompted initially by the coronavirus pandemic lockdowns.
In a world where major markets including U.S. Treasuries, major currencies, and major stock index futures are already trading 24 hours a day from Monday to Friday, stock exchanges have seemed somewhat outdated.
Several retail brokers, including Robinhood and Interactive Brokers, now offer 24-hour trading of U.S. stocks on weekdays, matching trades either with their internal holdings or through "dark pools" like Blue Ocean.
In Blue Ocean, stocks are often matched with daytime retail investors in Asia.
However, as overnight trading is more strictly regulated compared to dark pools, the perception of late trading could see significant changes. Exchanges are directly regulated by the U.S. Securities and Exchange Commission (SEC), tested for stability and security, and require approval to change any rules.
Exchange trades also form part of the consolidated "tape" (official record), which means that nighttime activities are more likely to set the tone for normal trading hours.
The NYSE survey asked respondents whether they believe 24-hour trading should take place on weekends as well as during the five weekdays, how to protect investors from price fluctuations, and how respondents would arrange overnight sessions.
It also asked if people agree that "spending time considering overnight trading is best spent during regular market hours."
The survey was conducted as Steve Cohen's Point72-backed startup 24 Exchange sought SEC approval to launch the first all-hours exchange. This application is 24X's second attempt; the company withdrew a proposal last year due to operational and technical issues.
As of last Friday, no letters had raised concerns about 24X's latest proposal. The SEC has several months to review these plans.
"I don't know how much volume they'll do at midnight, but it's not really up to the SEC to decide whether it has commercial viability," explained James Angel, a finance professor at Georgetown University, who submitted a letter supporting the 24X plan.
He added, "I favor letting the market decide. If it succeeds, we all benefit; if it fails, the investors in the exchange will suffer the loss."
According to two sources, the committee responsible for regulating the consolidated tape has begun meetings to discuss issues related to transitioning to a 24-hour exchange, including who should bear the costs. Clearinghouses that help settle trades are also operating within the specified times.
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