NYSE proposes around-the-clock trading

On the one hand, continuous trading could allow investors to trade any day and at any time. This is extremely important for investors based in time zones distant from the NYSE (e.g Asia-Pacific) as well as regions with different working schedules (e.g Saturday or Sunday to Thursday in some Middle East countries), as it gives them access to trade stocks on their desired schedules. This model could also smooth out intraday trade spikes around market opening and closing, thereby reducing price volatility during trading hours – something that investors in digital markets have already benefited from. 

However, all this cannot be achieved without clearing some hurdles. Continuous trading could have a detrimental effect on staffing and systems, as more personnel might be required to cover desks during non-working hours, and all supporting front and middle-office systems would need to be available 24/7 without maintenance downtime. Additionally, it has the potential to increase price volatility during off-peak hours given the expected decrease in trading volumes. 

Impact on the post-trade environment 

This proposal raises, once again, the question of whether a move to a continuous settlement model, or at least to a T+0 settlement cycle, is necessary. Currently, there is no worldwide standardised settlement cycle.  

While several markets, including USA, Canada, Mexico, Argentina, Jamaica, and India have moved into a T+1 cycle, others remain on a T+2 cycle for equities, most notably Japan and the European countries. The transition to a T+1 cycle, recently implemented in several countries, posed significant challenges for investors and capital markets worldwide.  

These challenges were mostly due to the technological enhancements necessary to achieve the change, regulatory changes, the need to match transactions earlier to be able to prepare for settlement and, more importantly, the FX and funding issues required to be able to complete settlement one day earlier. 

A move to a T+0 cycle or, even worse, to a continuous settlement cycle, would generate similar, if not more difficult, challenges. Among other challenges, it would require:  

• real-time matching;  
• match to settle;  
• a cross-industry settlement instruction solution;  
• full dematerialisation of physical securities (for countries which have not achieved 100% dematerialisation);  
• access equals delivery for all products; and 
• increased penalties for failures.  

In addition, this move would require building an infrastructure for real-time processing, transforming securities lending and foreign buyer processes, and accelerating retail funding. 

It is not known if a standardised settlement cycle will be implemented. However, there are enormous challenges to overcome if this is to be achieved. 

What about other exchanges? 

The NYSE’s potential move to continuous trading will set a precedent in the way stock markets operate globally. As far as we know, no other exchanges have similar plans. However, NYSE’s plan could put pressure on other exchanges to follow a similar pattern to remain competitive, which would require investment in technology and put a strain on operational teams. 

In recent years, many exchanges globally have struggled to maintain volumes and attract issuers to be listed on the local markets. Liquidity seems to be concentrated on a few exchanges that attract more listings, liquidity further concentrates in those markets, and so the cycle continues. NYSE’s availability for investors across all time-zones would add to the attractiveness of listing stocks on the market. 

Investors have also been diversifying their trading activities by exploring alternative investment vehicles or moving toward other financial instruments that run on a more continuous scheme, such as digital assets.  

The role of regulation 

Regulatory factors may also play a role in the way investors operate globally. Regulators need to ensure that asset safety continues to be a key consideration under any new trading scheme.  

Additionally, as digital assets become more regulated, institutional investors are likely to increase their investments in these assets, which means there will be more pressure on stock exchanges to replicate the extended trading hours of these instruments.  

Continuous trading therefore offers exciting opportunities, but requires thoughtful consideration of its impact on staffing, volatility, and settlement processes. As NYSE gathers investor feedback, the financial world awaits its decision.