This article was originally published on February 26, 2025.
By Jon Herrick, Chief Product Officer, NYSE
With SEC approval, the NYSE is one step closer to longer trading hours.
Earlier in February, the SEC approved the filing on an accelerated basis to extend trading hours on NYSE Arca, our fully electronic equities exchange, from 16 hours a day to 22 hours a day, five days a week. While this approval represents a positive step towards implementing our proposal, we must first align with the SIP committee, which consists of exchange groups, FINRA and industry advisors. This group manages the consolidated data feeds for the U.S. equity industry, and in our proposal, we committed to extending NYSE Arca’s trading hours only when the SIP data feeds are available for these same hours. Below we outline our reasoning for extending our hours to 22 hours in an effort to help the broader industry better understand the intricacies of extended-hours trading.
1. Everyone needs a break
Global markets, exchanges and trading platforms that offer “24-hour” trading tend to have a common thread: most take an hour or more break at least once per day. These breaks are used to ensure trades clear as expected, perform system maintenance, process various securities and contract operations (like coupon payments, corporate actions and expirations), and advance the trade date from one day to the next. There are substantial differences in both architecting and operating systems that operate 22 or 23 hours a day versus a full 24 hours; that continuous operation creates the need for a fundamentally different system architecture, such as separate systems, bringing additional operational complexity and cost. For these reasons, plus factors specific to equities trading, we proposed 22 hours and believe U.S. equities exchanges and ATS’s that plan to offer “24-hour” trading will more than likely take a similar pause. The duration and time of the break, in our view, should be aligned with one of the most critical elements in this discussion: clearing.
2. Centralized clearing matters
As a part of the Intercontinental Exchange, Inc. (NYSE: ICE), a leading operator of clearing houses around the world, the NYSE understands the systemic importance of centralized clearing and guaranteeing settlement.
We strongly believe exchanges should not match buyers and sellers when centralized clearing is not available because exchange clearing is fundamentally different than alternative trading systems (ATS) or other broker-to-broker clearing. When the clearing house (Depository Trust and Clearing Corporation or DTCC) is open, trades are submitted immediately, and counterparty risk is well defined. However, when DTCC is not open, the clearing firm absorbs counterparty risk. Clearing firms are specifically managed and regulated to serve this function; exchanges are not clearing firms and current market rules do not contemplate exchanges assuming counterparty risk by “holding” trades until the clearing house opens.
This is meaningful, even for small windows of time, as world events could create extreme volatility and volume. In such scenarios when the clearing house is closed, market participants trading on an exchange could have substantial exposure to an unknown counterparty, whereas on an ATS during such an event their exposure is to the ATS’s clearing firm.
3. What about corporate actions?
In 2024, the NYSE Group processed tens of thousands of corporate actions, including dividends, stock splits, distributions and other capital structure adjustments by corporations or funds. These adjustments happen while exchanges are closed between 8:00 PM and 4:00 AM, and nearly always affect the trading price of the security.
In a new world with longer trading hours, having a break in system operations is key to managing the risks associated with processing corporate actions. Today, some overnight venues mitigate this risk by not trading symbols with pending corporate actions. This approach can be improved through broader industry coordination with both DTCC and listing exchanges. We believe the industry is better served with a coordinated break in trading to ensure a safe and orderly transition to the next trading day, including the appropriate processing of corporate actions.
What’s next?
As the first established equity exchange to file and receive SEC approval to extend trading hours, the NYSE foresees global interest in U.S. equities markets continuing to increase, and responsibly expanding exchange trading hours will allow investors to safely access our markets. We understand both the opportunities and risks involved with extended-hours trading and strongly believe that any U.S. equity exchange should align its hours with those of DTCC, which can shift as DTCC continues to expand their hours of operation.
Notably, we proposed 22 hours, rather than 24, not because we don’t think the industry can or will get there — rather we saw this as the most pragmatic and expedient next step for the industry to meet this growing demand without introducing unnecessary risk, complexity, cost or time to market.
A critical next step to extend trading hours as quickly and responsibly as possible is SIP committee approval of our proposal. We believe extended trading hours can be achieved in 2025 and are hopeful the industry will take this important step in meeting global demand for expanded access to liquidity in U.S. equities without further delay.
