A significant step toward enabling 24-hour stock trading that is available to all investors is set to be taken by the financial services sector.
In a statement released earlier this week, the Securities Information Processors’ operating committees announced their plan to request permission from the Securities and Exchange Commission to increase the SIPs’ operating hours—the public data feeds that track trading activity and broadcast prices to investors—to as nearly 24 hours a day as feasible.
All U.S. equity exchanges would be able to provide trading almost 24/7 if the SEC gives its approval.
With only one one-hour technical pause per day to process things like corporate actions, such as dividend-related housekeeping and any changes arising from mergers and acquisitions, and other housekeeping issues, trading would continue to run from 8 p.m. Eastern time on Sunday through 8 p.m. Eastern time on Friday under the new regime.
In the statement, Jeff Kimsey, chairman of the SIP Operating Committees, stated, “We know the industry is eager to move toward 24-hour trading, and the SIPs are determined to make the changes necessary to make available the market data that will facilitate that.”
Compared to just two months earlier, when the SIPs operating committees rejected multiple member-submitted proposals of a similar nature, this most recent announcement marks a significant change.
What are the SIPs?
Since the 1970s, the SIPs have been a significant, if little-known, part of the larger financial-markets infrastructure in the United States.
In the United States, the feeds—there are two, though industry insiders frequently refer to a single “SIP”—gather and distribute information on all U.S. equity trades from major exchanges and those made in the over-the-counter market. The National Best Bid and Offer, which is the highest bid price and lowest offer price for a particular asset across all exchanges and liquidity providers, is determined by combining all of these quotes.
This judgment is crucial since the SIPs must be operational for the U.S. equities exchanges to function.
However, a few issues must be settled before the operating committees may proceed.
The SEC must approve, of course. The regulatory body has up to 300 days from the date of filing to make a decision. A request for comment from an SEC spokesperson was not answered.
The Depository Trust & Clearing Corporation has also been required by the operating committees to consent to providing clearing services 24/7.
The DTCC’s managing director and general manager of institutional trade processing, Val Wotton, stated that the SIPs operating committees’ decision represents a significant step in the direction of 24-5 trading.
“The recent introduction of the SIP is a significant milestone in this process, and DTCC supports the alignment around a regular trading day. The important work on the implementation route now starts,” Wotton said in a statement.
If trading is done around the clock, will the market still require an opening bell?
What will happen to opening and closing bells once 24-hour trading is implemented?
According to a representative for Nasdaq Inc. (NDAQ), the extra hours won’t have an impact on the market’s open and closure times. To set benchmarks for items like options exercise and transaction settlement, the market still has to observe a daily open and a daily close. Reliable benchmark pricing for the daily performance of stocks and funds must also be provided by exchanges.
Where exchanges will draw the boundary between one trading session and the next is still up in the air. A request for comment from a representative of Intercontinental Exchange Inc. (ICE), the company that owns the New York Stock Exchange, was not answered.
“The industry is striving to implement smart trading of 24-5 stocks. Oliver Sung, head of North American Equities at Cboe Global Markets Inc. (CBOE), told MarketWatch that the demand from international investors for access to U.S. stocks is still high and that CBOE is still working with market players to ensure a seamless rollout.
What possible effects might this have on investors?
Brokerages typically forward orders placed during the overnight session to alternative trading systems, or ATSs, however a few trading platforms currently provide overnight or 24-hour trading. After 8:00 p.m. Eastern time, overnight trading commences.
Since more exchanges will be able to operate for longer hours as a result of the SIPs modification, trading overnight will be comparable to trading during the day. In the end, this might contribute to increased volume and liquidity.
“At the highest level, this move from the SIPs is a great thing for the industry and, ultimately, the retail trader, because it will allow the overnight session to function much more like the core daytime trading session,” Charles Schwab Corp. (SCHW) head of trading services James Kostulias told MarketWatch.
International investors should find the change easier, especially those situated in Asia, where the trading day seldom overlaps with the U.S.
Bill Capuzzi, the CEO of Apex FinTech Solutions and a member of the DTCC board of directors, stated, “It’s pretty hard to work all day and stay up all night trying to trade the U.S. market if you’re in Korea.” Bruce is the ATS that Apex runs.
Since 2021, Blue Ocean, an ATS that offers overnight trading access, has been led by CEO and President Brian Hyndman. He has observed as more exchanges and financial organizations have extended their trading hours in an effort to achieve 24-hour trading over the years. According to him, this trend is a result of how technology is upgrading the information that investors receive.
“The equity landscape in the United States is evolving. Information is being released in real time, not just between 9:30 a.m. and 4 p.m., Monday through Friday,” Hyndman told MarketWatch. He pointed out that since President Trump’s social media tweets, announcements from Chinese AI companies, and other market-moving events occurring constantly, traders also demand round-the-clock access to markets.
“I think the U.S. equity markets are evolving and they’re giving traders the ability to manage their risk real-time as that information comes out,” Hyndman stated.
It’s true that not every trader is thrilled about the change. Hong Kong-based day trader Tony Ng told MarketWatch that he is concerned about if some of his preferred methods may become less successful as a result of the introduction of 24-5 trading on key exchanges.
“Scanning premarket gap-ups for stocks in play is the foundation of many well-liked day-trading methods. “Day traders who use these strategies, like myself, will have to adjust if the shift is made to continuous regular hours throughout the day, as premarket gap-ups and opening price ranges would no longer exist,” Ng wrote in an email to MarketWatch.
However, those who are worried about the transition shouldn’t worry just yet. If the SEC approves, Capuzzi said, the switchover probably wouldn’t happen until late next year.
However, Capuzzi thinks the exchanges may swiftly introduce Saturday and Sunday trading as well whenever it occurs.
