It’s 2017. Why doesn’t the NYSE offer stock trading 24 hours a day, 7 days a week? Does a human still have to be involved in every stock trade? It seems that computers can handle the trades more efficiently than any human can.
Computers, left to themselves, create very BAD results at times in the stock market.
In effect, the “market” as a whole trades all day long. It’s just that the off-hours trading is subject to some extra rules, or has to happen elsewhere. Frankly, it’s a good thing at times the market can cool down overnight.
I thought about that, and you could have humans keeping an eye on things to ensure something horrible doesn’t go wrong. If a cooling off period is required they can have it whenever it’s needed regardless of whether it’s during the morning, afternoon or evening.
I can’t see why they don’t just extend the day to 24 hours and staff accordingly, letting the computers manage things for the most part and the humans are there in case something bad happens. If you’re saying it’s more likely for something to go wrong in the US night versus the US day I guess I don’t see why that would be the case. Trading volume would just be spread out over 24 hours instead of 8 or 9 hours.
I suggest getting rid of after hours rules and allow people to trade whenever they want. I really don’t see why it matters what time of day it is (or day of the week for that matter). As I understand it much of the trading is made by computers and they don’t really care whether it’s day or night.
I could be right out to lunch since I know very little about the subject, but isn’t it the case that companies often like to make major announcements after the markets close? Kind of hard to do if the markets never close.
OP, you’re assuming that there’s a demand. I doubt that there is. There is a demand for 24-hour trading in currencies and a few dozen futures contracts, including stock market futures. But I just don’t think many investors want to trade thousands of individual domestic stocks overnight.
It’s not a trivial or cheap thing to set up and monitor the infrastructure for 24-hour trading in thousands of individual names, and nobody is going to spend the money to set that up if there won’t be much volume.
Humans can be involved in stock trades that don’t go through the NYSE. Whether a trade occurs on a particular exchange and whether it is initiated and/or accepted by computers on one or both sides are two different issues. Just because the exchange is electronic doesn’t mean a human didn’t enter the trade at one end or the other, though it could be directly computer driven at both ends.
And actually after hours trading of individual stocks is less likely to be wholly automated than trading during the day. The trading during the day that’s completely automated seeks to exploit tiny anomalies while a huge number of trades are occurring on lots of platforms at extremely thin bid-offer spreads. Off hours trading requires the willingness to give up a bigger bid-offer spread in thinner conditions of fewer trades happening. That’s more likely to be based on a human analysis of some new information about the company/stock.
Anyway off hours volume in individual stocks is still relatively small, and official ‘after hours’ doesn’t include 8PM-4AM eastern for example for US stocks. The place where off hours stock trading is more significant is in stock index futures on electronic futures exchanges. That runs 23 hours 5 day a week. The S&P 500 doesn’t really ‘cool down’ at night. You can see where it is any time 23/5 by looking here, and it will have moved a lot if there’s significant new information with big implications for the market.
those are 15 minute delayed quotes but decent broker software now will show it live.
Why does it need to be open 24 hours a day, seven days a week? Most places where we buy things are not open that often. Why is it important that you be able to trade stock within minutes (or seconds) of when you decide to do so?
One answer is someone may have “hot” information you want to act on before it becomes widely known, but it is not at all clear this is a good answer. The market will operate most efficiently if traders have time to access and digest information before trading. Yes it will mean that some people with particularly good access to information may not make as high profits as they could, but allowing that may not be best for society. We want there to be enough incentive to acquire information so that investors wish to do so, but we are not compelled as a society to allow them complete access to trade whenever they want.
That was a social response. A pure economic response would be: You can trade the stocks listed on the NYSE elsewhere. Many are listed on other exchanges or can be otherwise traded. You could always stand on the corner and try to sell them. It’s not illegal to do so. But the NYSE will open longer hours only if it is worthwhile for them to do so. On the NYSE specialists are required to give bid and ask prices. Who is most apt to arrive at 3 a.m. and want to sell NOW? It’s someone with information – just the someone the specialist doesn’t want to deal with unless he can sell the stock back quickly to someone else. Specialist make money on the spread, they lose money on average to informed traders. They don’t want to open the market at times when mostly informed traders will eb trading.
The answer why you’d want 24/5 trading is that ‘during the day’ is relative to timezone, and why make it harder to for capital from the other side of the world to trade in your market (wherever that might be). Surely there are populist opinions saying international capital flows are a bad thing. But the world financial system as a whole is set up on the assumption it’s a good thing, so why would one relatively small thing like trading hours be set up to make that marginally harder? (only marginally, since people can be paid to trade in the middle of the night where they live).
Back on NYSE specifically, it’s just not every relevant what the NYSE does. They represent something like 20% of US stock trading volume now, and the bulk of that goes via their own hybrid electronic system. The specialist open outcry system is pretty much a dinosaur park. The adaptability of that particular system to handle expanded hours is not the question.
The correct answer IMO to why non-regular trading hour individual stock volume is still relatively small is the usual liquidity chicken and egg. Even if the off hours trading is done in a pretty automated way over electronic exchanges it represents some commitment of additional labor and capital for market makers to play in those hours. More players don’t make that commitment because the volume and liquidity aren’t there, and the volume and liquidity aren’t there in part because they don’t make the commitment.
Which is sort of saying ‘because it’s not needed’, but subtly different. There’s plenty of financial trading that particular people say is ‘unneeded’ from their own social/political POV, but where the critical mass has been achieved where trading begets more trading. Not so much in 24 hr individual stock trading.
But again there is significant 24 hr trading in major stock indexes via futures, on electronic exchanges. Likewise in that market open outcry is a shrinking % even during regular hours, so 24 hr futures trading doesn’t mean people jostling in a pit 24 hrs a day.
To my way of thinking buying stock should be just like buying something on Amazon. If you want to buy 100 shares of GM, you go online to a Trading Portal and if there is someone willing to sell you 100 shares of GM at the price you want the transaction happens. It’s all handled by computer over the internet. Once the money arrives the shares are then deposited in your brokerage account. If I choose to do this a 3 am what difference does it make? The fact that we have being doing it one way for 200 years doesn’t mean we can’t make it easier and simpler. Let’s eliminate the middleman and having to wait until the market is open.
I’m one of those that works behind the scenes, although mainly now in futures. Brokerage firms and exchanges would need a tremendous amount of skilled people and it isn’t going to be easy to find them willing to work those kind of hours and keep your $5 trades.
It is an insult to me and people I know to claim that ‘it’s all handled by computer over the internet.’
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Again, what you see on TV done on the NYSE represents a tiny % of stock trades now. Like I said, the whole NYSE represents something like 20% of trading volume, and the great majority of that is done electronically on the NYSE.
IOW this not in limitation based ‘the way things have been done for 200 yrs’. It’s just as I said a chicken and egg thing stuck on the limited demand for active market making in individual stocks around the clock, so the liquidity and tight bid-offer is not there, which discourages trading, relatively speaking. Also at the retail level the retail brokers don’t want to commit to processing trades around the clock if it’s not going to be a lot of them, so most of them AFAIK don’t offer access to official pre and after hours trading to their customers. Institutions can trade official pre and after market which together with the regular trading day goes from 4AM to 8PM NY time for some US stocks. And there might be some wide price offered over-the-counter to institutions at 3AM for some stocks. But participants would generally rather wait for a tight price during the day than take a crap price at 3AM, and market makers aren’t going to deal at as tight a bid-offer when the next trade might not come along for an hour as they will when it’s coming in a millisecond, again chicken and egg.
And again, if people want to get or out of ‘US stocks’ in general at 3AM NY time that’s easy, buy or sell the S&P index futures. Those have attained the critical mass of liquidity so at least moderate sized trades (not necessarily huge ones) go at the same 0.25 tick bid-offer around the clock. And you can do that as retail through some brokers at reasonable commissions and margin (TD Ameritrade and Interactive are two).
7AM not 4AM, typo.
You might want to explore the history behind the Securities and Exchange Commission before continuing in your blithe assumption that allowing two people to trade stocks anytime they want is a good idea… 
I’m not really sure what you mean by this. People are already allowed to trade stocks anytime they want. Using an exchange is not necessary if you’re willing to find a buyer or seller by yourself.
Why, you could even offer to arrange - broker, if you will - meetings between buyers and sellers interested in the same securities who wish to keep their trades out of public view. Maybe even automate the process so it’s all done on fancy internet machines. That’s basically what dark pools are.
I think the question of why NYSE doesn’t go 24/7 is largely a chicken-egg thing. There’s no big, public platform for off-hours trading because there’s little demand for it, but there’s little demand for it because there’s no platform.
I’d be curious what all those skilled people would be needed for. Even today, your typical small retail trade is automatically bundled with a jillion other customers and any net change executed as a block trade by the brokerage once there’s enough to make it worthwhile. That process is already automated for the most part by brokerages, whether you’re typing in orders on Ameritrade or calling a dude on the phone.
A few examples of what will go on behind the scenes.
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Review large trades. Is it a possible fat finger? Can it possibly be filled at a higher price, even a much higher price than a customer might anticipate, spending more cash than the account has?
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Margin accounts can go into an immediate call.
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Possible fraud. Is there something suspicious going on when a buy and hold investor, 80 years, is suddenly liquidating all the stocks in a million dollar retirement account at 3 AM?
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Reviewing accounts to make sure the account can truly support the trade. You can’t return a stock trade for non sufficient funds. There are rules that govern buying and selling in cash accounts and margin accounts under $25,000.
There’s lots more that goes on behind the scenes. It really isn’t as simple as ordering Chinese food at 3 AM.
I run an analytics shop for commodities trading (which a lot of actually do trade 24 hours, but usually across different markets). We try to pull all of our settlements and forward curve marks by 6:30 EST for COB (close of business) numbers into an enterprise risk management system that then feeds all of our models which are set to run overnight once the numbers are in. A lot of them are barely finished by the time we come in in the morning as it is. We use the model runs to set forward positions for the traders, etc, etc. Traders hate doing stuff without analysts for cya, so while I’m sure this isn’t the actual bar to more 24-hour trading, it would matter.
24 hour trading (market, not after hours) was discussed during the nineties. Never really flew. Here’s one opinion why:
You are missing the effect of market makers.
What if you want to buy 100 shares of GM stock? And what if the stock is going up rapidly? How do you find a buyer? People are either buying or holding the stock until it peaks. How do you get in on it?
In the NYSE, they have specialists who trade in a stock. That means they own quantities of the stock that they can sell to you. And when the stock goes down, they buy the stock from sellers they can’t match to buyers.
A specialist can’t be around to trade 24 hours a day.
The NASDAQ uses market makers – usually brokerages.
Without a middleman, it’s difficult to buy stock when it’s going up, and difficult to sell it when it’s going down. There will be more buyers or sellers, so there has to be a pool of stock available at all times and I doubt you can program it how to buy and sell in a volatile market.