In a new white paper, the World Federation of Exchanges is airing concerns about exchanges extending time frames for trading.
Grygo is the chief content officer for FTF & FTF News.
Exchanges across the globe are mulling moves to extended equity market hours, but the World Federation of Exchanges (WFE) is airing a note or two of caution about the trade-offs and challenges of lengthening market hours for trading. The WFE is also arguing that round-the-clock trading is not inevitable.
The WFE concerns are hitting as the company 24 Exchange prepares to launch the first stage of the 24X National Exchange on September 29, offering trading of U.S. equities from 4:00 a.m. to 8:00 p.m. ET on weekdays.
In October of last year, the New York Stock Exchange (NYSE), pending SEC approval, announced plans to extend weekday trading via the NYSE Arca equities exchange to 22 hours per day. “The extended trading would take place from 1:30 am to 11:30 pm Eastern Time on all weekdays, excluding holidays, subject to regulatory approval. The NYSE will also seek support for extended trading from the U.S. securities information processors,” according to the initial announcement from NYSE, which is part of Intercontinental Exchange, Inc. (ICE).
Earlier this year, the Nasdaq Stock Market began taking steps toward a 24-hour, five-day-per-week system that it would like to launch next year.
However, the WFE in a new white paper is asking the industry to review “the implications of lengthening equity market hours,” including the opportunities and the challenges to operations, IT infrastructures, and regulatory frameworks.
The paper, dubbed “Policy and Market Impacts of Extended Trading,” finds that extended trading hours — “typically 22/5 or 23/5 as opposed to 24/7 — is technologically feasible and in some cases aligns with investor demand. Nevertheless, its adoption must be carefully calibrated to preserve market integrity, investor protection, and systemic stability.”
Among the top considerations highlighted in the paper are the operational demands caused by the move to longer hours.
“Exchanges, clearing houses, and brokers must adapt systems for high availability, real-time risk controls, and continuous surveillance,” according to the WFE paper. “Post-trade requirements: Market participants must adapt systems to handle 24/7 data feeds and post-trade processing, strengthen supervisory frameworks, and manage risks associated with low-liquidity periods. Real-time margin recalculation and funding access outside normal banking hours are required.”
Some of the WFE conclusions are:
- “Different markets will adopt different models depending on their liquidity, structure, and participant needs;”
- “It is important to consider something that is too easily forgotten: the needs and wishes of issuers of securities. 22/5 or 23/5 models offer a pragmatic path forward. They allow exchanges to meet rising demand while testing operational readiness before moving toward continuous markets;”
- “True 24/7 trading would represent a system-wide transformation. It requires the re-engineering of post-trade processes, governance frameworks, and supervisory oversight;” and
- “Inaction carries risks. Regulatory inertia could cause investors to migrate to less transparent, unregulated venues, undermining market integrity and investor confidence.”
The WFE acknowledges that while the shift is feasible, “extended trading enables exchanges and their ecosystems to assess operational capacity, investor behavior, and operational resilience within extended hours. This provides a structured pathway for managing risk, refining governance, and ensuring that markets remain fair, transparent, and orderly at all times.”
While the providers and investors are gearing up to make the change, policymakers will need to adapt “regulatory frameworks in ways that are consistent with long-standing principles of market fairness, transparency, and systemic stability,” according to the WFE.
The WFE does offer an answer to the question of whether a 24/7 trading model can be achieved that protects investors, strengthens market integrity, and bolsters global competitiveness: “With careful calibration, collaboration across the financial ecosystem, and the right safeguards in place, continuous trading can be introduced in a way that supports the next generation of capital markets.”
The full paper can be found here: https://shorturl.at/qEN8x
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