Bitcoin has a great advantage over traditional finance/banking: it's always open for business. There are no weekends, banking holidays, or other limitations.
That's also a big reason why it exchange rate fluctuates so much; during some portions of the day, there just isn't much liquidity and so smaller-sized trades have outsized impacts on the exchange rate.
With tech, futures markets, before-/after-market trading, and individual brokerage retailers offering around-the-clock trades (on their own books, since the general stock market isn't open), questions have obviously been raised: Maybe Wall Street Should Always Be Open?
Between 8pm and 4am in New York, overnight trading, including on Robinhood, is now mostly conducted through Blue Ocean, a so-called alternative trading system that launched in 2021 specifically to offer overnight access. Members of these alternative systems — also known as “dark pools” — trade among themselves at prices that are not made public.
I'm skeptical. One spillover benefit of financial markets—aside from price discovery and capital reallocation—is the vast liquidity that happens from trading the same instruments on the same exchange at the same time. When markets are deep (an economist's synonym for liquid, i.e., lots of trades on the order books at all times), volatility falls and price discovery becomes better and more efficient. And look at this chart:
Maybe we should go the other way and restrict trading to only a few hours in the day, say 10-11 and 3-4 pm (EST)?
The somewhat artificial cut-off at 4 pm EST also causes problems:
Few in the industry want to change the official 4pm close — by far the busiest trading point in the current day because it is used to set the daily reference prices for traded securities, from which the $30tn-plus held in mutual and exchange traded funds take their value. After the close, an entire system of clearing and settlement also kicks in, ensuring that sellers receive their payment and buyers have their new holdings re-registered under their name.
Anyway, here's Jennifer Hughes in the FT, interviewing a bunch of Robinhood reps and traders.
The New York Stock Exchange, the largest in the world, is one of a number of groups which are now looking to offer much longer trading windows. This is pushing investment professionals to engage in surprisingly complex debates around the simplest-seeming questions. When, for example, does a trading day begin and end if it runs around the clock? What would be the closing price of a stock — typically the reference point for trillions of dollars in funds — if the day were seamless?
But the world will (probably?) drag stock trading there anyway:
By some measures, stocks are already late to the overnight party. The dollar trades 24 hours a day on various platforms around the world and dealing in S&P 500 index futures, which signal the likely market direction ahead of the New York opening, is brisk from the Tokyo morning onwards. Cryptocurrency investors, meanwhile, have never known anything but a 24-7 digital world.
Charles Schwab already doing it:
And the current discussions:
There are some plumbing-type questions too that I, honestly, am not equipped to answer:
Other Wall Street brokers agree. Ask them about the issues that 24-hour advocates must address and they list thorny ones: clearing or guaranteeing trades, building out technology and staffing, running the “tape” to cover longer hours and ensuring all their systems can cope.
Anyway, interesting developments. Whatcha think, Stackers?
non-paywalled here: https://archive.md/qNAWq