Last Friday (25th Oct), the New York Stock Exchange announced plans to expand the weekday trading hours on its equities exchange to 22 hours a day. Currently, extended hours range from 4:00 am until 8:00 pm EST, which includes both pre-market and post-market trading. With the new schedule, extended hours would start at 1:30 am and continue until 11:30 pm, Monday to Friday, excluding holidays. The change would not affect regular market hours, which will continue to run from 9:30 am until 4:00 pm local time.
Provided the updated rules are approved by the SEC, the new trading schedule would extend to all US listed stocks, exchange-traded funds and closed-end funds listed on the exchange.
As usual, the most interesting question is why. According to a spokesperson, the official reason given for the development is to accommodate the growing demand from investors in different time zones across the globe. Fair enough, and entirely accurate, but there are probably a few missing pieces to the puzzle here.
The first piece is that the body responsible for settling such trades, the Depository Trust and Clearing Corporation (DTCC), has also recently stated their intentions to extend operating hours. To clarify, buying and selling stocks on the NYSE is only one part of the operation. The actual settlement, that is to say the transfer of ownership of a share from one person to another, is sorted out by the DTCC in the background. Most traders have likely never heard of it, but the DTCC is an absolutely crucial organisation that all market participants depend on.
An interesting thing about the DTCC is that over the past couple of years, they have been quietly dabbling in various endeavours aiming to leverage cryptocurrency infrastructure to expand their capabilities. Essentially, the plan is to carry traditional financial operations onto blockchains. This would offer a number of benefits, including 24-hour markets. Blockchains do not sleep, they cannot be turned off. If people want to trade, they can do so unabated no matter the time of day.
Another benefit to using crypto is of course automation. Operations traditionally carried out by humans on often decades-old software could instead be handled by smart contracts. Transfer of ownership would be trivial to implement for example, as would automated dividend payments, to say nothing of more complicated systems such as shareholder voting rights. Once tokenised assets take off in earnest, the possibilities are endless. This is not to say that the old infrastructure will be replaced with newer systems – the financial world is simply not set up for this. Instead, pre-existing, isolated systems will be given additional capabilities, allowing them to interact with one another in ways that were previously unfeasible. Liquidity problems could easily become a problem of the past.
To many people, this announcement by the NYSE represents very obvious step towards an interconnected, permanent, global trading environment. However, like with many aspects of the financial world, regulations are the limiting factor and will no doubt require a long and laborious process before we see some of these ideas materialise. Exciting times nevertheless.
Risk Warning : Trading derivatives and leveraged products carries a high level of risk.
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