What would happen if stock trading was available around the clock
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Illustration: Aïda Amer/Axios
If bonds and currencies can be traded 24 hours a day, why not stocks? That's the question the New York Stock Exchange is asking market participants.
Why it matters: Small traders, especially ones based in Asia, would gain a certain amount of convenience. But off-hours markets can be treacherous places for investors.
The big picture: Off-hours stock-market trading is a gambler's paradise, featuring low volumes and wide spreads. So it's hardly surprising, in a world where gambling has never been more popular or more lucrative, that efforts are being made to expand it.
Where it stands: Blue Ocean and Robinhood offer 24-hour trading to small investors, five days a week, but those are private share sales that don't take place at officially recorded prices.
- If the NYSE were to get involved, prices would become public and available to all market participants. High-frequency traders and hedge funds would be more likely to pay attention and try to make money from nocturnal market anomalies.
- A proposed new exchange, 24X, has already applied to the SEC for permission to operate on a 24-hour basis.
Follow the money: Stock trading occurs mostly in two short windows: just after the market opens at 9:30am, and just before the market closes at 4pm.
- Even though stock volumes in the middle of the day are in a long and seemingly inexorable decline, they still dwarf the volumes during off-hours, which are slowly rising.
- A move to 24-hour trading would spread volumes even more thinly. The result would probably be further migration of institutional investors to the opening and closing sessions, the only times when stocks are available in the kind of quantity that big investors require.
Between the lines: Small investors are much less concerned with volume and liquidity, and much more likely to value convenience and immediacy.
Our thought bubble: Given extremely low-cost access to broadly diversified index funds and ETFs, investing in any individual stocks, especially during off-hours, is a risky gamble by comparison.
- As any casino will tell you, risky gambles are more popular at night.
- Were it to build such a casino, the NYSE would be creating a whole new revenue stream for brokers like Virtu Financial and Citadel Securities that specialize in trading against retail investors.
Editor's note: This piece was updated to clarify the examples of brokers that could benefit from 24-hour trading are Virtu Financial, which owns Knight, and Citadel Securities.
