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Nasdaq is joining the race to offer round-the-clock trading of US stocks, in the latest sign of the importance the biggest exchanges are attaching to the tiny but fast-growing corner of the markets.
The US bourse, best known as the home of many large technology companies, on Friday revealed it planned to apply for regulatory permission to extend its hours through the night. The New York Stock Exchange and Chicago-based Cboe Global Markets, the third big player among US exchanges, have already made similar applications.
At present, US equities are available for trading between 4am and 8pm Eastern time. Pre-market and post-market sessions already stretch the day beyond its core hours between 9.30am and 4pm.
In recent years, however, online retail brokers such as Robinhood and Interactive Brokers have begun offering overnight dealing to their clients. Those operations are supported by the Blue Ocean trading platform, whose business is now being looked at by its bigger rivals.
In an article posted on LinkedIn, Nasdaq president Tal Cohen gave several reasons for the decision, including the rise of retail trading, as well as the growth of international holdings of US stocks. Both groups are more likely to want to trade outside normal US business hours.
“Attracting more investment to our markets presents a compelling opportunity for both the US and global economy,” Cohen wrote. “It is therefore incumbent on us to enhance access for those operating across different time zones.”
The Nasdaq boss warned that many problems needed to be ironed out before 24-hour trading could become a reality — something that its rivals have previously acknowledged.
Issues to be addressed included the need to extend the operation of the “tape” — the record of transactions done on exchanges — to cover the extra hours. It would also be necessary to find commonly agreed ways of handling so-called “corporate actions” — for example when a company undertakes price-changing moves such as shrinking or expanding its share count or announcing dividends.
Cohen acknowledged concerns among the companies whose shares would be traded.
“A recent Nasdaq survey of our listed companies indicated that around half of the respondents have reservations about expanding trading hours on exchanges, in particular as it relates to liquidity and corporate actions,” he wrote.
NYSE, which is owned by Intercontinental Exchange, submitted its application in October while Cboe did so last month.
A plan to offer overnight trading by another group, 24 Exchange, or 24X, was approved in November by the Securities and Exchange Commission. But its late-night ambitions still rely on resolution of the marketwide issues identified by Nasdaq and others.
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