SEC Commissioner Raises Six Questions on 24-Hour U.S. Stock Trading Mechanism: How to Ensure Timely Dissemination of Major Overnight Information? Liquidity and Regulatory Issues Remain Unanswered

BlockBeats news, September 17 — SEC Commissioner Hester M. Peirce, speaking at a roundtable on 24-hour trading in U.S. equities, pointed out that extended trading hours are taking shape in the form of 23 hours, five days a week. Although such extended-hours trading has existed on certain ATSs (alternative trading systems) for years, it still accounts for less than 1% of total NMS (National Market System) stock trading volume and is highly concentrated in a small number of stocks. Over the past two years, both new entrants and traditional trading platforms have been actively expanding operating hours in response to domestic and international demand. On the infrastructure side, NSCC converted its clearing operations to a 24×5 model in June, running continuously from 8 p.m. Sunday to 8 p.m. Friday; the SEC approved extending SIP (Securities Information Processor) operating hours, with the new schedule set to launch on December 6; the Commission also approved a market-wide limit-up/limit-down plan during extended hours, and trading venues have also established standards for handling corporate actions.

Peirce acknowledged that many market participants have mixed feelings about this shift, viewing it as an inevitable but not entirely welcome complication, and worrying about thin overnight order books, wider spreads, heightened price volatility, and back-office operations, batch processing cycles, and critical IT maintenance being compressed into just one hour each night. Beyond operational issues, there are more fundamental human concerns, such as sleep. Extended trading hours would amplify fears about a 3 a.m. data feed outage or social media rumors hammering stock prices while headquarters is asleep. U.S. markets are not breaking new ground and can learn from the foreign exchange market (which has run 24/7 for decades), the crypto market (which never sleeps), and overnight index options and futures markets (generally 23/5). South Korean trading platforms also announced plans last week to extend trading hours.

Peirce raised a series of questions: What lessons can markets with continuous trading experience offer U.S. equities regarding liquidity, market making, manipulation, and cybersecurity risks? How should brokers fulfill their best-execution obligations when liquidity is fragmented and spreads are wider? For asset managers, when liquidity and execution costs are unfavorable, is choosing not to trade overnight still an acceptable fiduciary decision? Do issuers need to change their behavior, given that issuers currently typically file documents and release material information around core trading hours, while documents filed with EDGAR after 5:30 p.m. are generally not processed until the next business day — does the SEC need to modify its systems to ensure timely dissemination of corporate actions and material information during overnight hours? Should the Commission provide guidance or relief to ease the burden of extended trading on issuers, especially small issuers?