FLASH FRIDAY is a weekly content series looking at the past, present and future of capital markets trading and technology. FLASH FRIDAY is sponsored by Instinet, a Nomura company.
Are we headed toward a true 24/7 global securities marketplace?
It seems that way, at least anecdotally.
After-hours trading has been on the rise, driven by retail stock traders. Cryptocurrencies are round-the-clock markets, for better or for worse. And the nascent 24 Exchange is staking its future on the notion that 24/7 trading is inevitable.
The debate about the pros and cons of all-hours trading harkens back to a time when moving even just incrementally beyond the traditional 9:30-a.m.-to-4:00-p.m. window was a big discussion.
In a July 1999 Traders Magazine article “After-Hours Trading: The Unanswered Questions,” some of the concerns brought up regarding a Nasdaq proposal to add a 5:30 p.m. to 9:00 p.m. trading session were downright quaint.
From the article:
“As the president and head trader at McLean, Va. brokerage firm Ryan, Lee & Co., Patrick Ryan doesn’t even know if his office is heated late in the evening, never mind exactly how many traders he’ll need to cover a night session.”
A PaineWebber trader said “The biggest problem is if the systems can handle it. There will have to be a second backoffice and clearing cycle at night. You would need management at night.”
A broker-dealer operations manager said “You’re going to wind up with too many individuals looking to gamble. People will take advantage of it, and it will cause a lot of confusion.”
Bear in mind that was in 1999, when trading was predominantly high touch and conducted over the phone, and effectively 100% of traders were physically present in the office every day. Barriers to after-hours trading are much lower in today’s mostly electronic market that has passed the COVID-19 work-from-home test.
While there was a fair amount of resistance and uncertainty expressed in the 1999 article, there was also advocacy for extended hours.
Said a chairman of a brokerage firm: “Over time, all exchanges will be open for much longer hours. To fight it would be like standing in front of a truck.” A CEO of a day-trading firm said: “We should have it. When was the last time you went to a mall and it closed at 4 p.m.? The market should be made convenient to the public.”
Flash forward to 2022, nearly a quarter-century later. After-hours trading is an accepted part of the market, though interestingly enough, it remains somewhat of a niche corner, comprising just a low-single-digits portion of trading volume. Some of the same reservations remain, mostly pertaining to liquidity and volatility.
This is just speculation, but it’s reasonable to surmise that market participants in 1999 would have projected extended hours trading to be bigger today.
Will after-hours trading be much different in another 23 years? Perhaps not.
