Title: The Overnight Trading Boom: A New Era for Wall Street
In an unprecedented shift, the stock market is waking up to a new era of overnight trading. Amidst the buzz, the world’s largest exchange, the New York Stock Exchange (NYSE), is considering a 19-hour trading day, from 1:30 am to 11:30 pm, to keep pace with the growing demand for after-hours trading.
The trend is fueled by the increasing availability of sophisticated trading apps on mobile devices and a growing base of small, retail investors who are comfortable trading online from their sofas, just like shopping on Amazon. Many of these night owls developed a taste for trading during the pandemic lockdowns and have now taken their investing habits outside of traditional business hours.
The overnight trading surge is not limited to retail investors. Professional traders and institutions are also joining the fray, with exchanges and brokerages competing to offer 24-hour trading services. The global head of trading for a West Coast asset manager warns that the real questions are about what regulators would have to consider in the extended hours for oversight and technology, citing the potential burden on the industry.
Despite the enthusiasm, many in the industry are expressing trepidation about the ability of their systems to cope with the change. Wall Street brokers are grappling with the need to clear trades, guarantee transactions, and ensure continuity during the extended hours, raising concerns about thin liquidity and potential disruptions. The real estate company’s global head of trading notes that big players may not find extended hours attractive due to limited trading opportunities and the risk of price movements during the extended hours.
The NYSE is not alone in exploring the possibility of extended trading hours. Blue Ocean, an alternative trading system, has been operating 24/7 since 2021, and 24X, a Bermuda-based exchange backed by hedge fund billionaire Steve Cohen’s Point72 Ventures, aims to trade nearly all day long. The latter’s approval by the Securities and Exchange Commission (SEC) has raised concerns about the potential burden on the industry.
As the debate rages on, many experts agree that the shift to overnight trading is inevitable, with Asian retail investors already driving demand. Retail trading volume on Robinhood, a popular online brokerage, surged 12-fold in November, with Nvidia stock plummeting 5% amid concerns about Chinese AI upstart DeepSeek. The surge is expected to continue, with many brokerages extending their trading hours to meet the demand.
In the face of this shift, the industry is grappling with the complexities of defining the start and end of a trading day, determining the reference prices for traded securities, and ensuring the continuity of systems during the extended hours. As the debate continues, one thing is certain – the world of high finance is about to get a whole lot later.