As the prospect of 24/7 trading begins to gain traction across the industry, proprietary trading firms are split over whether this will positively or negatively impact the market, a recent Acuiti study has found.
As revealed in the Proprietary Trading Management Insight Report, produced in partnership with Avelacom, 37% of the proprietary community felt positively towards the concept of round-the-clock trading, while 38% expressed negative views.
Of these responses, North American firms were more supportive of a shift to extended hours than their European counterparts. The report also revealed that ultra-low latency firms appear to be more likely to support 24/7 trading than point and click or algo firms.
Additionally, while there was recognition of the benefits 24/7 trading could bring, such as the ability to react to news at any time which was cited as the main advantage for approximately 56% of respondents, firms were more aligned on the challenges posed.
Specifically, more than 80% of proprietary trading firms surveyed were most concerned about the operational staffing and resource requirements that extended hours would need, with liquidity fragmentation and risk management complexity also recognised as challenges.
“The proprietary trading community recognises the potential benefits of 24/7 trading but is cautious about the operational and liquidity challenges it introduces,” said Ross Lancaster, head of research at Acuiti.
“It is clear that infrastructure across the market, particularly with regards to payments and the movement of collateral will have to be upgraded.”
Read more – Reducing market hours makes sense in practice, but feasibility remains a question
The possible need for investment was also touched upon in the report, with the majority of participants recognising that some level of funding will be required to make this shift.
Of these, 45% said that only a small investment would be necessary, while around a third (34%) instead believe a larger investment will be required.
Further funding challenges were also highlighted. Since the prospect of moving to a 24/7 model will require money mobility to also move round-the-clock, 59% of the proprietary trading firms in the survey agreed that upgraded banking facilities would be required to support market infrastructure, indicating the wider changes that extending trading hours would bring to the industry.
Discussions around extended trading follows an uptick in industry developments within the sector. In recent months, the New York Stock Exchange (NYSE), Cboe Global Markets and Nasdaq have all proposed plans to extend US equities trading hours, while firms including Clear Street, Trillium Surveyor and LiquidityBook have unveiled partnerships with Blue Ocean Technologies to offer extended trading capacities to their clients.
Building on this, the shifting landscape towards extended trading hours will also be explored at The TRADE’s upcoming webinar, 24/7 equities trading: A red herring or an inevitable reality?
Acuiti and Avelacom collated their report based on a survey of the Acuiti Proprietary Trading Expert Network, spanning senior proprietary trading executive across the globe.