NYSE to consider 24/7 stock trading

NYSE is considering extending stock trading to 24/7. Søren Nymark and Peter Jørn Jensen examine the possible effects on liquidity, volatility, operations, settlement costs and investor protection.

By Søren Nymark, Partner | 6 June 2024

The Financial Times recently reported that the New York Stock Exchange is considering extending stock trading to 24/7, including nights and weekends.

On the one hand, other instruments such as bonds and currencies already trade around the clock, so why not stocks? It could fit a global, always-on market. On the other hand, is there sufficient market interest? The NYSE is currently assessing that question.

Discussing the matter with colleague Peter Jørn Jensen, a range of questions came up:

• Trading at more convenient times could increase market liquidity and efficiency. Weekend trading would presumably be driven mainly by retail investors and could therefore involve lower volumes and greater price volatility. Around-the-clock trading could provide more flexibility for European and Asian investors in other time zones.
• Around-the-clock trading could create more opportunities for high-frequency traders to seek price anomalies, as well as for brokers that specialise in trading against retail investors.
• Breaking news late on Friday could place more pressure on operations in a T+1 environment, including liquidity and weekend settlement. How should cash and settlement be handled while banks are closed, and could this create failed transactions when banks and clearing houses reopen on Monday?
• 24/7 trading would increase costs – and who should bear the burden? The significant change to processes outside normal operating hours would require around-the-clock operational coverage and system availability.
• Could the less-liquid broker pre-market and after-hours offerings cease to exist?
• How might 24/7 trading affect investor protection, particularly when price volatility can be higher? Some casino-like retail trading venues also report increased risk-taking during night trading.
• Would a positive decision spread to other stock exchanges, making 24/7 trading a de facto market practice?

It will be interesting to see whether this consideration leads to a decision to proceed and, if so, how investors, brokers, market infrastructures and regulators address these issues.