Sleepless on Wall Street: All-night stock exchanges coming soon

The US equity exchanges are set to extend their operating hours to accommodate around-the-clock trading, starting December 6. This shift aims to cater to the growing demand from foreign investors and compete with crypto and prediction markets, which have disrupted traditional Wall Street operating hours. Overnight trading, currently existing through alternative trading systems, has seen a 358% surge in trading volume compared to the previous year.

However, its impact is minimal, making up around 1% of the total equity trading volume. While proponents argue that the expansion will remove time-zone barriers and provide better access to US markets for foreign traders, skeptics are concerned about lower liquidity, wider bid-ask spreads, and amplified trading risks. Institutional investors are primarily worried about the impact on market quality during the extended hours.

Despite initial reservations from buy-side equity traders, there is a growing sense of inevitability as regulators move forward with the changes. Market infrastructure providers are preparing for the shift, with Depository Trust & Clearing Corp. already operating a 24x5 model. However, the transition is met with skepticism, as institutional investors view the low liquidity and volatile nature of overnight trading as reasons to wait and see before fully embracing the concept.