One of the most notable developments in the trading landscape is the push toward 24-hour trading. While this shift has been incremental, it is now becoming more pronounced, as major exchanges and trading platforms adapt to the evolving needs of global markets.
The transition toward 24-hour trading is driven by several factors, with the most prominent being the influx of capital from international markets. Historically, trading was confined to specific hours, with retail broker-dealers and a handful of Alternative Trading Systems (ATSs) leading the way.
But now, major exchange groups like the New York Stock Exchange (NYSE), NASDAQ, and Cboe Global Markets see the value in extending their market hours, according to Adam Cohn, VP and Head of Trading Operations at TradeStation Securities, Inc.
At the moment, 24X National Exchange is the first and only exchange to receive (last November) SEC approval for 23-hour-a-day trading.
“As markets become increasingly globalized, particularly with capital inflows from Asia, there is a growing recognition that improving liquidity in overnight markets is essential,” Cohn told Traders Magazine.
While 24-hour trading is primarily seen in the equity markets today, there’s speculation that other areas, such as options markets, may eventually follow suit, he said. “I wouldn’t be surprised if you see the option markets follow suit at some point,” Cohn said.
The shift to 24-hour trading presents numerous advantages, especially as traders look to access liquidity around the clock. However, it also introduces several challenges that firms must address.
One of the central questions facing the industry is how new technologies, particularly artificial intelligence (AI), will impact the future of trading operations.
“Everybody talks about AI, but I don’t know how it’s going to impact firms as far as order routing and trading,” reflected Cohn.
“The adoption of 24-hour trading itself is a major technological shift that is likely to have a bigger impact on trading operations than any individual technology at this stage,” he stressed.
Another pressing concern is staffing, according to Cohn. Unlike traditional trading hours, firms must now consider how to staff their operations during off-peak hours, such as the early morning or late night. “Staffing 24 hours, how you do that, how you manage that… it’s a different model than most firms are used to,” he commented.
This may require firms to rethink their workforce strategy. Many exchanges may look to offshore locations to manage their 24-hour operations, potentially taking advantage of the global talent pool to meet staffing needs.
In addition to staffing, the logistics of settlement and clearing present challenges that will need to be addressed as 24-hour trading becomes the industry standard. “You’re looking at settlement and clearing in a 24-hour environment with corporate actions,” says Cohn.
“There’s going to have to be some clarity around how we process that,” he added.
With corporate actions and trade settlements occurring throughout the day and night, clarity will be crucial to ensure smooth operations and minimize risks.
Another concern that needs to be resolved is the handling of credit risk. “If you’re not posting trades to DTCC in real time, there’s some credit risk,” Cohn noted. As real-time trade posting becomes increasingly important, brokerage firms will need to ensure they have the infrastructure in place to manage risks effectively.
However, as the industry adapts to these changes, one significant transformation will be the widespread adoption of 24-hour trading across brokerage firms. “It has become an industry standard and everybody’s going to have to do it,” the expert explained.
What initially started with a few forward-thinking firms will soon become the norm, making it an essential offering for firms that wish to stay competitive in the market.
“The adoption of 24-hour trading is not just a trend—it’s an industry-wide transformation that is here to stay,” he concluded.
