Stay informed with free updates
Simply sign up to the Financial & markets regulation myFT Digest — delivered directly to your inbox.
A 24-hour stock exchange has been approved by US regulators, allowing expanded round the clock trading for the first time in any major market.
Start-up 24 Exchange, which is backed by Steve Cohen’s Point72 Ventures fund, was given the nod for a two-part plan by the Securities and Exchange Commission on Wednesday.
It will launch initially in regular hours, then expand to include a nightly back-of the-clock session between Sunday and Thursday once broader market infrastructure is in place.
While Treasuries and major currencies, such as the dollar, are traded almost continuously on weekdays, stocks have been something of a laggard because of tight rules designed to protect investors, and because of the complexities and time needed to settle trades.
But in recent years round-the-clock trading has been given a boost by the rise of retail investors who are keen to trade stocks outside working hours just as they deal in cryptocurrencies, which operate all the time.
Brokers such as Robinhood execute customer out-of-hours stock orders in so-called “dark pools” whose members trade among themselves, and whose prices are not disseminated across the market.
A regulated overnight exchange will mark a big change because it represents the “lit” market where trades and their prices become the official record. This is designed to help investors get the best price but may catch those asleep off-guard.
“Traders are most at-risk when the market is closed in their geographic location,” said Dmitri Galinov, chief executive and founder of 24X. “(We) will seek to alleviate this problem by facilitating around-the-clock US equities trading,” he added, describing the approval as a “thrilling development”.
This was 24X’s second application to the SEC, after a previous attempt in 2023 met with objections and queries. The approved version also modified an original plan to offer trading at weekends.
24X must now work with rival exchanges, which between them manage the consolidated “tape” of market prices, on how to manage and fund its expansion to cover trading between 8pm and 4am before it can launch its overnight session.
The approval comes just weeks after the New York Stock Exchange filed an application to expand its own trading day to 22 hours. The move underlined the growing appeal of night-time dealing, even as many institutional investors are worried light overnight trading volumes could allow small trades to have an outsized effect on prices.
Tyler Gellasch, chief executive of the investor advocate group Healthy Markets Association, warned: “A price move from a 5,000 or 20,000 share order overnight that leads to a margin call on a 2mn share position — that isn’t something an institutional investor running a pension fund wants to be waking up to.”
Sifma, an industry body that had called for the SEC to conduct a wider review of the implications of 24-hour trading, said it was reviewing the regulator’s 106-page approval order.
Source link
