<div id="readability-page-1"><div>Wall Street pros are feeling uneasy about retail investors again. Only this time it's not about the trades they're making — it’s about when they're making them.The amateur-investing revolution that has swept US markets since the pandemic is helping fuel a boom in overnight stock trading. It’s playing out at the likes of Robinhood Markets Inc. and Interactive Brokers Group Inc., which have adopted ways to offer the buying and selling of American shares 24 hours a day, five days a week.That has effectively eliminated the traditional eight-hour overnight break, and the move has proved so popular that others are taking note. Even the infamous “pink sheet” market — the over-the-counter home of companies who can’t or won’t join a major exchange — is set to enter the non-stop fray in July.Yet as the boom gathers pace, some industry players are raising significant concerns about this march toward a stock market that never sleeps.“We’re only going to have trouble in the middle of the night when things are so illiquid,” says Joseph Saluzzi, co-head of equity trading at Themis Trading LLC.A market veteran of more than three decades, Saluzzi has been perturbed by a handful of huge moves at unexpected times recently, like a 20% surge in GameStop Corp. on a Sunday evening in June. His big fear is that someone could take advantage of slow overnight trading to create momentum in a share, pushing it higher for a quick profit. But there’s a litany of other worries, from the impact on mental health of an endless trading day to the potential for US stocks to siphon yet more capital from overseas markets that already struggle to compete.Regulators, who are contemplating an application from a Steve Cohen-backed firm for the first 24-hour stock exchange, have stressed the need for protections against fraud. The New York Stock Exchange, which fired-up the debate in April when it polled industry participants about non-stop trading, has yet to publish its results and has since emphasized the work needed to ensure the market is ready.As it stands, the cash market for US equities runs from 9:30 a.m. to 4 p.m. in New York, five days a week. That’s supplemented by a form of electronic extension allowing limited types of trading in a pre-market session starting at 4 a.m. and a post-market period lasting until 8 p.m. By matching orders within their own systems or using specialized platforms, the overnight upstarts are offering trades right through the night in the form of private share sales (rather than transactions at publicly recorded prices). In the process they have dragged forward the start of the stock-trading week to 8 p.m. on a Sunday, eight hours before the official pre-market begins.“In a couple of years this is going to be mainstream,” says Brian Hyndman, the chief executive officer of Blue Ocean Technologies LLC, which is the largest dedicated overnight trading platform in the US. “People don’t want to have to wait for somebody to ring the bell on Monday morning to start trading. They want to trade when it’s convenient for them and when the time is right.”That’s a big part of the overnight-trading pitch: It lets investors react to market-moving events whenever they occur. It also benefits retail traders who often don’t have the same opportunity as other players to transact during business hours (pre- and post-market volumes surged amid the influx of amateurs during the pandemic). Plus it serves international investors clamoring for a slice of US equity exceptionalism from distant time zones.Interactive Brokers introduced overnight trading of US shares in 2022 because of demand from investors in Europe and Asia, according to , executive vice president of marketing and product development. With about 85% of the firm’s new client applications coming from abroad, it has now ramped up its offering to more than 10,000 stocks and ETFs. The number of overnight trades in those securities has grown 308% this year through June and now represents about 2.2% of Interactive Brokers’ overall volume in US shares. &#34;I do believe we are at the beginning,” Sanders says. “Because we are a global trading world and there is interest in US markets, this will continue to grow for individuals and institutions.&#34;At Blue Ocean, which launched in 2021, the number of stock transactions taking place in an average night climbed to 40 million shares in May. That’s already been enough for the young company to break even — and Hyndman believes it could ultimately rise to as high as 1 billion.It pales next to the average 12 billion shares changing hands in the regular market, however, highlighting the biggest risk of overnight trading: the danger of over-sized moves in such relatively shallow volumes.In recognition of this, firms limit the size of potential price moves (Blue Ocean only allows 20% in either direction, for example). The platforms also only accept limit orders, which direct buying or selling a stock at a specific price or better. Those offer investors a layer of protection because if the prevailing price is too high or too low then the trade won’t be executed.“You’re never going to buy or sell a stock outside of a price where you want to buy or sell it,” says Hyndman. All the protections help ensure Blue Ocean hasn’t “caused any harm or undue volatility to the system,” he says.Still, a Bloomberg Intelligence analysis showed that nearly three-quarters of stock volume on Blue Ocean was in illiquid names, or those with a spread between bid and ask price of over 30 basis points. At major alternative trading venues which focus on regular hours, that cohort accounts for an average of just 16.6% of activity.“You might incur extra spreads” when trading overnight, Sanders at Interactive Brokers says. “People should do their homework and understand what the spread is during regular trading hours and compare it to overnight and decide if it's worth it.”Wall Street is no stranger to round-the-clock markets, since currencies and Treasuries trade non-stop for five days a week and the crypto world runs 24/7. Nor is it a novel idea in equities. TD Ameritrade Inc., now part of Charles Schwab Corp., introduced 24-hour stock trading in 2018, starting with roughly a dozen exchange-traded funds before expanding the list a year later to 24 securities.But the platform hasn’t made any subsequent additions. A spokesperson for Schwab says that while it is prepared to provide more products, it’s mindful of “the unique risks and limitations that differentiate overnight trading.” It offers securities that correlate with products that have an active futures market moving at the same time, rather than those “more susceptible to lower or variable liquidity and/or a deficient price discovery mechanism.”OTC Markets Group Inc., the over-the-counter venue for unlisted shares, is preparing to launch its own overnight platform in early July. It’s a notable move because even in regular hours the pink sheets have a historic reputation for being highly speculative.Matt Fuchs, executive vice president of market data at OTC, argues the overnight risks are little different to those seen in illiquid securities during normal trading, and the key is providing full transparency about volumes and price changes. The firm will also limit moves — to a maximum 10% to 15%, according to Fuchs — and will start overnight trading with a small group of shares before expanding the list. Meanwhile, a key part of OTC’s business is in cross-traded securities of major global corporations not listed on US exchanges. That means its overnight offering will also enable investors to trade many European companies before or after their regular market hours, for example.“A lot of the initial demand we’re seeing is in relation to retail,” Fuchs says. “Over time we’re looking to cater to institutions as well.” While retail investors might embrace the convenience of overnight trading, it could come at the expense of pros in an industry already notorious for relentless demands. A market that never sleeps could create mental hazards for anyone who feels pressured to constantly monitor moves or reactively adjust positions, according to Malcolm Polley, chief market strategist at Stratos Investment Management.He also frets that the ability to trade at any time is bound to fuel short-term speculation, rather than a focus on business fundamentals. Academic research has shown that small-time investors are on average worse off when they’re given more time to trade. One study from researchers at Stanford University and the University of Washington argues limiting trading hours curbs active retail trading, leading to improvements in investment performance.“When the investment decision moves from thought to reaction, it’s no longer an investment decision,” says Polley.After-hours trading accounts for as much as 25% of Robinhood’s total volumes, and transactions in the evening session jumped an additional 10% during May’s meme-stock pop, according to Steve Quirk, the firm’s chief brokerage officer. There were “monster volumes,” he said in a recent panel discussion hosted by BI. That kind of demand is why 24 Exchange, a firm backed by billionaire Cohen that offers currency and crypto derivatives trading 24/7, is seeking approval to start a 24-hour exchange for equities. (In contrast, Blue Ocean runs what’s known as an alternative trading system, which is regulated more like a broker-dealer.) The firm expects a decision from the US Securities and Exchange Commission by November, according to founder and CEO Dmitri Galinov. The odds of approval are unclear. In a letter to the SEC commenting on the application, the Securities Industry and Financial Markets Association — the finance world’s main industry group — noted that approval would have significant effects on overall market structure. A “likely scenario” would see other national securities exchanges also transition to 24-hour trading, it wrote.The regulator declined to comment, but speaking on the sidelines of a Treasury market conference in New York in June, SEC Chair Gary Gensler confirmed the agency is reviewing applications for round-the-clock trading. He said it wanted to ensure adequate protections against fraud and manipulation, and that orders were being sent to central clearing houses.The need for trades to be centrally cleared — settled by a third-party firm acting as intermediary between buyer and seller — is why 24-hour stock trading can currently only run for five days a week. No clearing houses operate on Saturday or Sunday, meaning overnight transactions on a Friday or Saturday night couldn’t be processed the next day. Most on-exchange equity trades in the US are cleared by the National Securities Clearing Corporation, part of the Depository Trust &amp; Clearing Corporation. As the structure of the market evolves the clearing house is discussing the extension of its hours with members, “including the potential to operate 24/7,” according to Michele Hillery, general manager of NSCC's Equity Clearing, DTC's Settlement Service at the DTCC. Any change would have to be industry-led and “any necessary rule changes would be subject to regulatory review and approval,” she says.For now, practical challenges like clearing are a key reason not every firm is rushing to extend trading hours. NYSE Group Inc. President Lynn Martin told Bloomberg Television its poll of opinions on 24-hour trading showed “there are a lot of things to consider, mainly on the infrastructure side” if it’s going to be implemented in a responsible way. The exchange declined to comment further.Whatever happens, overseas markets will likely be watching the 24-hour trading experiments with keen interest — but probably not because they plan to follow suit. Instead, they’ll be wary of another potential channel for local investors to funnel money toward US equities. Stocks in Europe and Asia already struggle to match the allure of their counterparts in America, where the tech giants dominate.“Some large US companies are a staple of global portfolios,” says Que Nguyen, chief investment officer of equity strategies at Research Affiliates LLC. “Anything that increases that US-centric culture, including extended hours trading and deepening liquidity, would put further pressure on non-US markets.”</div></div>

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24-Hour stock trading is booming, causing concerns among Wall Street professionals. Retail investors are driving this trend, with platforms like Robinhood and Interactive Brokers offering round-the-clock trading. However, there are worries about illiquidity and potential for market manipulation. Regulators are emphasizing the need for fraud protections. While overnight trading has its benefits, such as allowing investors to react to market-moving events, there are risks associated with oversized moves in shallow volumes. This trend is expected to continue growing, particularly among international investors.

24-Hour Stock Trading Is Booming – and Wall Street Is Rattled