Wall Street overnight stock trading to launch in December

On 6 December, Wall Street’s traditional trading day is set to stretch through the night. Nasdaq, NYSE Arca, 24X National Exchange, and Cboe EDGX are planning to launch new overnight sessions running from 9 p.m. to 4 a.m. New York time, pushing the US stock market closer to a continuous, 23-hour trading cycle.

Why Wall Street is staying open

The expansion aims to capture a surge in demand from international investors and compete with round-the-clock markets like cryptocurrencies. While overnight trading currently makes up just 1% of total US equity volume, it is growing rapidly. Activity surged 358% over the past year, according to data presented at a Securities and Exchange Commission roundtable.

The liquidity trap

But the overnight market is currently a very different beast to the daytime session. It is thin, highly volatile, and heavily concentrated. In August, just 15 stocks on average—many of them cheap, sub-dollar shares of companies based in China and Hong Kong—accounted for half of all overnight trading volume. During regular hours, that same share of volume is spread across 256 stocks.

This thin volume has institutional investors nervous. While retail traders and specialized platforms have embraced all-night trading, larger fund managers are hanging back.

David Easthope, a senior analyst at Crisil Coalition Greenwich, said buying-side firms are worried about "market quality" during these extended hours, particularly wider bid-ask spreads and poor liquidity, rather than just staffing logistics.

Joseph Saluzzi, partner and co-head of equity trading at Themis Trading, is deeply skeptical about the shift. He pointed out that combined pre- and post-market trading still only accounts for about 10% of total market activity. "Institutional investors have no interest in trading in a low liquidity, wide-spread market which is likely to be very volatile," Saluzzi said. "There’s actually a case, if you wanted to make it, that we have too many hours in the market, not too few."

Setting up the plumbing

Despite the hesitation, the financial plumbing is already being laid. The Depository Trust & Clearing Corp, which clears US stock trades, moved to a 24x5 model in June. Securities Information Processors, which process market data, have also secured regulatory approval to extend their hours. Under the new schedule, the only gap in the trading week will be a one-hour maintenance window between 8 p.m. and 9 p.m. each evening.

Whether the big players will eventually join is the multi-billion-dollar question. Brian Hyndman, chief executive of Blue Ocean Technologies, said the "usual suspects" will be ready on day one, but notes that investment banks and buy-side firms have been hesitant to get involved.

Jeff O’Connor, head of market structure at Liquidnet, suggests institutional money managers are in a "wait and see" phase. If trading during these late hours manages to establish reliable pricing, the cost of overnight execution should fall, eventually drawing them in.