Discussions around the want or need to expand trading hours for equities have been ongoing for several years, with varying levels of acceptance and subsequent action being taken across the globe. The more recent interest in this topic appears to have been garnered through existing use cases in asset classes such as the rapidly growing cryptocurrency landscape, which offers trading 24/7, including holidays.
Whether equities will eventually adopt the 24/7 model is another story all together, however. Zoom in further, and approaches to the subject differ greatly depending on where you are on the globe. Sentiment surrounding the feasibility of the extension of trading hours remains starkly different in the US in comparison with the UK and Europe for example, where institutions in recent years have petitioned to shorten the trading day.
While US venues have been more aggressive in recent months with their desire to expand trading hours in equities, those in Europe and the UK appear to be dragging their heels, with no apparent plans on the horizon to follow suit. And the same US-led proactivity can be seen in the global shift to shortened settlement that is currently underway.
“Discussions about extending US equity market trading hours have resurfaced, especially following the implementation of T+1 settlement [last year]. This move aims to compete with digital assets that offer continuous 24/7 trading,” says Eric Heleine, head of e-trading and data at AXA Investment Managers Core.
US venues have been bullish in the last 12 months with plans to extend their trading hours. Several platforms, including OTC Markets and Blue Ocean Technologies, have offered out of hours trading for some time now, but recent moves by major exchanges suggest the topic is set to become increasingly mainstream.
In October 2024, the New York Stock Exchange (NYSE) proposed plans to extend weekday US equities trading on its NYSE Arca platform to 22 hours a day, subject to regulatory approvals. Meanwhile, 24X National Exchange received approval from the US Securities and Exchange Commission (SEC) for near-continuous sessions for equities trading.
Cboe Global Markets revealed plans in February of this year to expand its trading hours for US equities, moving to a 24/5 model, subject to regulatory approvals. This was followed by news revealed in March that Nasdaq had begun engaging with regulators to enable 24/5 trading on the Nasdaq Stock Market.
The potential benefits are clear and include the ability to respond to episodic events and manage risk in real-time. The extension also offers US traders a greater overlap with other regions in different time zones.
“Demand for 24-hour trading is largely focused on US markets, with increasing demand from other regions to trade US equities and gain exposure to specific indices or to specific stocks,” states Magnus Haglind, senior vice president and head of market infrastructure technology at Nasdaq.
“While it’s US-centric today in terms of liquidity and interest, it’s an emerging trend that is likely to spread across other markets.”
Retail-led innovation
Whether the push in the US is fuelled by institutions is another question all together. Depending on where an individual sits in the trading value chain, their priorities tend to differ.
For the retail segment, the move could mean access to markets in times that are more suitable to an individual trader. However, for institutional investors – who often seek to reduce market toxicity and fragmentation – there is, a preference for shorter trading sessions.
“It gives the retail market the opportunity to react to overnight news, geopolitical headlines, perhaps announcements that come out after the core US markets are closed. It probably provides greater opportunity for the retail sector,” suggests Ed Wicks, global head of trading and liquidity management, Asset Management, Legal & General.
Amid opposing responses to expanded trading hours, there seems to be a consensus that equities shouldn’t necessarily exactly mirror crypto markets, exampled by the 24/5 model opted for by US venues.
“We might be on the way, but 24/7 specifically is quite a way out. When you start talking about weekends and holidays, that adds many layers of complexity,” suggests Kevin Tyrrell, head of markets at NYSE.
Retail trading has been central to much of the push in the US to extend the trading day. Crypto was a game changer for many retail participants, particularly due to the ability to trade at hours that suit an individual trader. However, while the US boasts a large and growing retail market, this is something that the UK and much of mainland Europe lack.
“The demand [for extended hours] probably comes from two market participant types. It’s the retail brokers […] and the market makers that want to interact with retail flow, because it’s generally considered relatively benign,” says John Fruen, head of EMEA market structure and liquidity strategy at UBS.
“Also, the dynamics that go into an out of general hours period, which include conditions like wider spreads, probably improve the economic terms for those market makers when providing liquidity to retail.”
From a UK/EU perspective, where retail volumes are significantly reduced, the push towards expanded trading hours appears to be far weaker, with no key reason to implement the shift, at least from an institutional perspective.
“I would say that there’s maybe a bit of a bifurcation between institutional and retail. To my knowledge, most of the demand that is coming out tends to be either US-based or Asia-based retail demand, rather than what I would call core institutional demand,” argues Wicks.
“Am I advocating for 24-hour trading to support our business in US equities – or any equities for that matter? Not at the moment, no. Additionally, because much of the overnight demand at the moment is mainly from retail type investors, you run the risk of having slightly elevated volatility in those sessions.”
Less is more?
Even from an exchange perspective in the EU, no consensus has been reached on whether to expand or even reduce market hours for equities, despite several major initiatives announced in the US in recent months.
“We ran a consultation for our participants both on the continent and in the UK and no clear consensus emerged from it. In summary, the UK was more in favour of shortening whilst the continent preferred a status quo,” says Vincent Boquillon, head of cash equities at Euronext.
“So given that there was no consensus among industry participants on buy-side, sell-side and industry associations, we don’t see the immediate need to take action in that regard, however we remain fully supportive to engage with the industry if a need materialises.”
The situation in Europe is markedly different to the one developing in the US. As opposed to extending trading hours, in 2020, buy- and sell-side traders urged the London Stock Exchange and other European venues to shorten equity trading hours to 9am to 4pm GMT, aiming to improve trading floor culture, boost diversity, and enhance intraday liquidity.
After intense debate, exchanges rejected the proposals, arguing it wouldn’t be a ‘silver bullet’ for diversity or mental health challenges.
“There are several reasons why a reduction in hours could be viewed as a positive move. The ones that are most frequently quoted include fragmentation of liquidity. We have longer trading hours in the core session than the US do, with a tenth of the volumes. We talk a lot about venue fragmentation, but time is a fragmenting element as well and liquidity may be improved by shortening those hours,” suggests UBS’ Fruen.
“The most recent argument has been around the transition to T+1 and the fact that we are going to need to do a lot more post-trade allocation processing on T0, than we do today. Asking people to stay later to do that doesn’t help work life balance in an industry which already has a reputation for longer working hours than may be offered to people elsewhere and may have an impact on the diversity of talent that can be recruited.”
Elsewhere, arguments exist that having wider coverage across the globe is more important than having extended hours to accommodate the global trading of equities. The benefits of overlapping with other markets seems more preferable than expanding or reducing trading hours.
“On balance, there are greater advantages potentially to be garnered from overlapping with Asia and Middle Eastern markets when you’re sitting in Europe and then overlapping with the US markets,” argues Wicks.
“I would come down on that advantage rather than reducing market hours. I don’t see the need and I wouldn’t say I’m a big advocate of reducing market hours. The overlap is important, particularly as we’re all trying to grow capital market participation.”
Culture clash
A clear disparity exists between the US and Europe when it comes to this topic, which brings into question why such opposing views exist. Retail participation is much larger in the US, but also, liquidity dynamics and volumes are notably different too.
“If you look at the liquidity between the US and Europe, it’s vastly different. The US has been growing. The European trading day is longer than our trading day in terms of regular market hours and it’s heavily skewed towards the closing auction. We have a very large closing auction but there’s not as much of a skew here as there is in some of the European markets,” says NYSE’s Tyrrell.
“That all adds up to just regular continuous trading. What we do even today in the extended hour sessions would just be much harder in Europe. There doesn’t seem to be a lot of liquidity in the regular hours as it is.”
Echoing this, Nadsaq’s Haglind notes that from a global investor perspective, there is a huge focus on the US as a market of choice based on the depth of the liquidity. “Through conversations with our European technology clients, based in the middle of global time zones, there isn’t the same level of demand compared to the US. However, market operators are increasingly assessing how they can enhance their infrastructure to make sure they’re ready as investor appetite increases,” he says.
“Across different client groups we see interesting dynamics between serving local market participants, with a shortening of trading hours in some cases, and the need to attract global liquidity.”
At present, it’s hard to justify European equities as having sufficient liquidity to trade on a 24/7 basis. Market participants within the region argue that that’s not where the focus should lie.
“Perhaps there’s an argument to say it makes sense to try and find ways to provide facilities for retail investors to be able to trade when they want to, in ways that give them good outcomes, to help with the overall liquidity picture,” suggests Fruen.
“But ultimately, having a core market session which includes an open, a continuous session and a close, is probably something the majority of the incumbent institutional investors and sell-sides and even venues want to maintain.”
Shifting trading desk dynamics
If the industry were to transition to extended trading hours, the changes would likely mean round-the-clock operations, increased compliance, staffing and monitoring. Trading desks, and their make-up, are defined by changes in the landscape, be it through developments such a T+1, the introduction of new technologies such as artificial intelligence, and growing global presences.
“Trading desks are evolving and this started out with the crypto trading craze. As crypto trades 24/7 365, certain firms had overnight desks already built to support that,” says Brian Hyndman, president and chief executive at Blue Ocean Technologies.
“It was an easy extension to begin trading equities if you were already trading other asset classes overnight. We see more and more firms here in the US expanding and supporting overnight trading, or relying on their offices in Hong Kong, Tokyo or Singapore, to support their 24 by five trading.”
Some argue that the way in which trading desks are currently set up would be sufficient to allow for continuous or expanded trading hours for equities, however, this viewpoint aligns more with larger firms already operating large teams globally. For smaller firms, having a follow-the-sun model would require a lot of adaptation, including the need to set up in different geographical locations to accommodate time zones.
“The technology we have is already managing an extension of trading hours on some market segments. There would be, for sure, adaptation to the post-trade session, which would be a challenge. But in terms of technology, we know how to do a 24/5 market today. You don’t need a revolution or innovation to do that,” says Nicolas Rivard, head of cash equity and data services at Euronext.
Despite differing viewpoints in the US versus the UK and Europe, it appears that extending trading hours in equities is going to happen. Much like with the shift to T+1, other regions may find their hand forced as the US continues to steam ahead. With an increasing number of US venues looking to implement the change, UK and EU venues could find themselves pressured to follow suit in order to remain competitive.