As extended trading hours begin to mark their territory on US equities markets, industry experts at the Equities Leaders Summit in Miami weighed up whether institutional scepticism on the prospect is starting to ease.
Across the panel, the overarching view seemed to be that while exchanges appear to be warming to the idea, with references made to shifts to from major US stock exchanges such as the New York Stock Exchange (NYSE) and Nasdaq, the buy-side is not yet entirely convinced.
For Jason Lenzo, global head of trading at Russell Investments, a key challenge which is clouding buy-side perspectives on an extended hours shift are the operational and staffing requirements needed to fully support 24-hour trading.
Specifically, he made reference to obstacles such as liquidity remaining thinner during extended trading periods, particularly outside major US market hours, as well as difficulties in attracting traders to willingly work overnight shifts, due to the psychological impacts of stress and fatigue.
“There’s a lot of question marks in my mind about how well this is going to integrate into the market,” he said.
“One of the things people need to consider is: do you need a single central located office just here in the US or do you actually start locating geographically around the world just to make sure your traders aren’t vampires?”
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A similar standpoint was also heralded by Peter Weiler, executive vice president, head of data and analytics at Trading Technologies, who emphasised operational challenges on the sell-side, with continuous trading raising concerns about managing settlement processes outside normal business hours.
Reflecting on this, he concurred: “From speaking with clients, most of their concern isn’t so much with just simply trading and moving capital but more from the operational standpoint. If you’re on the sell-side and you work for commissions and you have the factory running, you’d rather have it running.
“The market is usually driven by client demand. But are clients clamouring for it on the buy side? I’d say no; we have a better view on the sell-side of clearance really following the money.”
A matter of time
Despite some disparities in opinion on extending trading hours, there was a clear shared agreement across the panel that continuous trading was inevitable, as regulation and critical infrastructure shifts across the industry drive forward this market change.
Specifically, Dmitri Galinov, founder and chief executive of 24 Exchange highlighted the Depository Trust and Clearing Corporation’s (DTCC) planned transition to a 24/5 trading schedule, with implementation currently set to come into play in June 2026.
Emphasising the importance of industry readiness for extended trading hours, he said: “When players like NYSE and Nasdaq are making big changes, it becomes inevitable. We have changed the industry and if you take one thing from this conference, it’s that a shift is coming pretty soon. A lot of firms will migrate, so it’s important to begin preparing now.”
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In addition, Lenzo also noted further knock-on effects that may arise from a shift to extended trading hours in the US equities market. Specifically, the possibility that more alternative trading systems (ATS) and dark pools will enter overnight trading as volume increases, in an effort to offer additional liquidity and innovation opportunities.
“We haven’t stepped into that ATS ecosystem, but it’s something we’re evaluating, watching, looking at, but not yet executed.
“Hopefully as that volume picks up there will be more players in there. For investors and it more broadly extends the theme of democratising trading.”
As extended trading hours begins to blaze brighter on the US equities horizon, it appears that the industry can no longer ignore the prospect, and preparations are now essential as the landscape starts to shift.