The US Securities and Exchange Commission (SEC) has approved the first round-the-clock exchange, 24X.
24X made its registration application to the US Securities and Exchange Commission to (SEC) to launch the first every 24-hour exchange for equities on 6 February 2024, following an unsuccessful application in 2023.
24X’s proposal sought to “significantly expand trading outside of regular trading hours” for NMS stocks. Specifically, the national securities exchange’s initial plan was to operate every day of the year (all 365 including holidays), 23 hours a day – subject to certain pauses.
Following this announcement, the launch is initially set for regular trading times, with after-hours trading from Sunday to Thursday to come once the set-up is complete.
“[…] the Commission shall by order grant an application for registration as a national securities exchange if the Commission finds, among other things, that the proposed exchange is so organised and has the capacity to carry out the purposes of the Exchange Act and can comply, and can enforce compliance by its members and persons associated with its members, with the provisions of the Exchange Act,” said the SEC in its official report.
Specifically, the SEC highlighted several factors which must be ensured, including that 24X guarantees fair representation of the exchange’s members when it comes to its directors – namely that one or more directors representative of investors and not associated with the exchange, or with a broker or dealer.
Across the industry, desire for after-hours trading is on the up as barriers to entry continue to lower with this latest decision by the SEC by no means minor.
The New York Stock Exchange (NYSE) is also planning to extend its weekday trading on its NYSE Arca Equities Exchange to 22 hours a day it announced back in October.
The exchange confirmed it was filing updated rules with the SEC for the extended trading, with clearing to continue via the Depository Trust & Clearing Corporation (DTCC) which has also recently announced plans to extend operational hours.
This approval of 24X is set to have significant effects on the region’s market structure, as well as the potential for other securities exchanges to follow suit in light of the SEC’s decision.
Speaking to The TRADE, Sylvain Thieullent, chief executive at Horizon Trading Solutions highlighted that the transition to round-the-clock trading presents a wealth of opportunities, but also complexities.
“As evidenced by this ruling from the SEC, stock exchanges, traditionally confined by time zones, could now find themselves playing catch-up in a world where trading knows no bounds […] Trading in the dead of night requires the need to navigate potentially volatile markets with precision and extreme quickness. Outside of regular trading hours, liquidity tends to be thinner.
“Thin liquidity can result in wider bid-ask spreads and increased price slippage, making it more challenging for high-speed traders to execute trades at desired prices. Only algos capable of analysing vast volumes of data, detecting patterns, and executing trades with split-second precision will separate the winners from the losers. With regulators scrutinising every move, ensuring the integrity and reliability of these algorithms will be key.”