By Nicholas Beroud
Every Monday through Friday for the past century, the iconic bell of the New York Stock Exchange (NYSE) has rung at 9:30 a.m. and 4 p.m. Eastern Daylight Time, marking the start and end of each trading session. This longstanding tradition not only signals trading times for investors at the NYSE but also sets the pace for financial markets globally, influencing economic decisions worldwide.
The Idea of 24/7 Trading
This practice may be on the brink of a radical change. In a move that may be fitting for the city that never sleeps, The Financial Times reported that the NYSE is considering a bold move that would enable 24/7 stock trading, representing a historic departure from more than a century of regulated trading hours.
One could easily argue that this reconsideration is heavily influenced by the increasing prominence of cryptocurrency’s decentralized market, which operates continuously. With Bitcoin recently reaching a new all-time high, the appeal of non-stop trading, mirroring the operations of the crypto market, continues to grow among some traders and market experts. Nevertheless, a significant number of people, including financial regulators, remain opposed to the idea of a 24/7 trading model, citing concerns over market stability and investor welfare.
The NYSE conducted a survey among market participants to gather their opinions on the prospect of round-the-clock trading. The survey included questions about whether trading should extend to weekends in addition to the traditional five-day week, methods to protect investors from increased volatility, and the operational details of overnight trading sessions.
The proposal to transition to a 24/7 trading model raises a crucial question: Will this change, benefit, or harm the traditional pace of financial markets and global financial stability?
Challenges and Opportunities of Extended Trading Hours
Extending trading hours to a 24/7 model means that reactions to news and global events could immediately impact share prices, leaving individual investors with limited time to respond. While institutional investors and professional traders may minimize risks through extensive staffing, retail investors are likely to bear the consequences of these rapid changes.
To address these challenges, it would be necessary for the NYSE and the Securities and Exchange Commission (SEC) to introduce regulations that moderate the disadvantages caused by time zone differences. For example, in the face of ongoing geopolitical conflicts, investors in the EMEA (Europe, Middle East, and Africa) region might react more quickly to local events compared to their North American counterparts, thus gaining an advantage.
Another significant challenge arises for traders and finance professionals, whose jobs are already recognized for long and demanding hours. Introducing overnight trading could intensify stress levels, raising questions about the sustainability of such schedules. Is the possibility of additional employee burnout justified by the benefits of non-stop trading? Financial institutions considering overnight operations will have no choice but to offer substantial compensation to attract staff for these unforgiving hours, as well as be aware of the potential errors that fatigue might introduce into trading decisions. This shift would require widespread institutional changes across global financial firms, potentially reshaping the entire finance industry.
What About the Little Guy?
Unfortunately, the implications of this shift for individual investors like you and me are complicated. While institutional investors may benefit from the ability to monitor markets and trade 24/7, the average investor may not have the resources or the time to stay equally engaged. This constant market activity could lead to a scenario where those with the capability to react instantaneously to market changes, typically large institutional investors, could dominate the trading landscape, potentially marginalizing smaller investors.
Additionally, the increased volatility that might stem from round-the-clock trading could make the markets less predictable, further complicating investment strategies for individual investors. Without the necessary tools and strategies to manage these risks, individual investors could find themselves at a larger disadvantage than they do today, struggling to keep pace with a market that never sleeps.
Future Implications and Regulatory Considerations
Despite the negative feedback on this proposal, advocates of 24/7 markets have highlighted the potential benefits of increased accessibility and participation. They point out that the rise of retail trading, as seen during the GameStop short squeeze of 2021, has significantly boosted overall market participation.
“The same people that trade cryptocurrencies have begun to trade more stocks because of events like GameStop, leading to a notable increase in market participation,” stated an advocate for 24/7 trading. They argue that investor demand is sufficient to support continuous trading, mentioning scenarios where immediate market reactions are wanted. “If Elon Musk tweets something on Saturday, people would want to buy or sell Tesla stock immediately,” the advocate explained. However, this perspective may oversimplify the proposal and fail to address the potential risks of treating the equities of publicly traded companies like the highly volatile cryptocurrency market.
Whether or not this implementation will be realized remains to be seen; nevertheless, if it does, it won’t be as black and white as the proposal is made out to be. Since the 2008 financial crisis, the SEC has been cautious in its regulatory efforts to level the playing field, so it is safe to say that if the NYSE bell-ringing tradition is eventually changed, it may not be as detrimental to investors as it may seem right now.
Yet, such changes will not go into effect for quite some time, as they require careful consideration of the broader implications, including the potential impact on global markets and the day-to-day operations of traders. In a historic year for equities, marked by the S&P 500 breaking 5000 points for the first time, one must question the necessity of expanding the operations of the world’s largest stock exchange by market cap. With the market already achieving unprecedented heights, is it wise or necessary to push for even more trade accessibility, or should stability and careful growth be the focus?
Featured image courtesy of History.com
