On a Sunday evening in Chicago, Steve Quirk, a seasoned market professional, routinely checked the S&P 500 futures and observed a significant drop. The next day, he noted a spike in overnight trading on the Robinhood platform, particularly as Nvidia’s stock price fell due to concerns regarding the emerging Chinese AI competitor, DeepSeek.
Nvidia’s struggles led to Robinhood experiencing its second-largest late-night trading session since launching overnight transactions 18 months ago. The volume on that Monday night was only surpassed by the trading volume during the U.S. presidential election in November.
“Our users are proactive; they look for further opportunities to trade overnight,” said Quirk, Robinhood’s chief brokerage officer.
The surge in late-night activity on Robinhood reflects a broader growing interest in overnight trading, enabled by advanced trading applications and an increasingly savvy group of retail investors who are as comfortable trading from their smartphones as they are shopping online.
During pandemic lockdowns, many retail investors discovered an enthusiasm for trading, and as they return to the office, their habits have shifted to include after-hours trading. The overnight trading session, running from 8 PM to 4 AM in New York, often overlaps with active trading by household investors in Asia, who eagerly trade popular U.S. stocks during their business hours.
Despite the considerable participation in retail trading in the U.S.—where over half of all households own stocks directly—the changing behaviors of individual investors traditionally had minimal impact on the larger institutional asset management industry. This is now evolving as established market players express interest in extending trading hours. The New York Stock Exchange (NYSE), as the world’s largest exchange, is among the organizations exploring broader trading windows.
This shift has sparked complex discussions among investment professionals about operational logistics, such as defining trading days that span 24 hours and determining closing prices for securities in this new model.
Concerns include how portfolio managers will navigate significant changes in their holdings while asleep, as well as the operational challenges of maintaining complex trading systems around the clock. Tyler Gellasch, CEO of the Healthy Markets Association, highlighted the practical implications of 24-hour operations, noting, “The worry will escalate when you wake up to a margin call on a large position.”
By various metrics, the stock market is late to adopt continuous trading. The foreign exchange market operates 24/7 globally, as do cryptocurrency markets. Historically, U.S. stock markets have adhered to structured trading hours, despite variations. Even with the increasing influence of West Coast markets, the official closing time remains 4 PM in New York. The last major adjustments to trading hours occurred around 20 years ago when exchanges introduced pre-market and after-hours trading sessions.
Daytime trading has advantages given the involvement of numerous stakeholders including over a million individuals employed in the U.S. securities industry alongside executives and regulators. The structure of the stock market is designed to facilitate the smooth operation of approximately 12 billion shares traded daily among various participants, including pension funds, high-speed traders, and retail investors.
Most overnight trading, including on platforms like Robinhood, currently occurs through Blue Ocean, an alternative trading system that began in 2021 to cater specifically to overnight transactions, with a trading volume of around 40 million shares nightly—still a minuscule portion of overall trading.
The introduction of competing exchanges is on the horizon. The Securities and Exchange Commission has given tentative approval to 24X, a Bermuda-based exchange with plans to operate almost all day long. This marks a significant development as it aspires to trade nearly 23 hours daily once the required regulatory framework is established. Meanwhile, the NYSE is also considering extending its trading hours from 4 AM to 8 PM, potentially moving to a schedule of 1:30 AM to 11:30 PM.
The involvement of exchanges is crucial for market integrity as they provide public trading prices compared to private “dark pool” venues. This transparency allows investors to assess whether they received competitive prices on their trades.
“Feedback from various market participants suggests a strong desire for extended trading hours,” noted Kevin Tyrrell, head of markets at NYSE.
However, industry caution remains, particularly regarding risk management and operational logistics. Adjustments to existing practices would be necessary to ensure compliance with regulatory standards during extended hours. Significant concerns surround the possibility of resulting disruptions to business operations and the pressure to maintain 24/7 monitoring by trading firms.
In a recent congressional hearing, Justin Schack of Rosenblatt Securities remarked on the complexity of the current market structure, suggesting that it may not be ideal for achieving simple trade execution.
The potential for round-the-clock trading raises questions about trade guarantees, technology infrastructure, and other operational challenges. The uncertainty regarding overnight trading rules and their implications for established daytime regulations is a major concern for institutional investors.
Overall, while trading outside regular hours is currently limited, it is becoming an area of increasing interest, especially as global investors seek to engage with the U.S. market. The opening of new offices by trading platforms in Asia and the expansion of trading hours by major firms signals a notable trend towards greater participation in overnight trading sessions.
As trading behaviors evolve, discussions about expanding the hours and operations of U.S. stock markets continue to heat up, reflecting a changing investment landscape.
photo credit: www.ft.com
