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When trading stocks takes milliseconds and can be done from a smartphone, the notion that markets close seems quaint. Overnight trading of US stocks, between 8pm and 4am in New York, will in 2026 take a big step forward with the addition of faster settlement, reducing risk. But it is still not clear who really gains from the new hours.
The popularity of trading in the wee hours has grown as many new retail traders from pandemic-era lockdowns have remained involved in the markets. Yet volumes are still small: less than 2 per cent of total US equity trading is currently done overnight.
True, this is set to grow over time and could reach a tenth by 2028, according to a survey published in December by consultants EY and the main US clearing organisation, Depository Trust and Clearing Corporation. That wouldn’t be a bad outcome — after all, it took a couple of decades for existing pre- and post-hours trading, which introduced a window on either side of the US trading day, to reach that point.
But while all three of the big US exchange groups have sought regulators’ approval to operate overnight, this will remain a small part of their business. Nasdaq, the most recent of the big three to submit detailed plans, makes almost twice as much from new listings as it does from trading, so the added revenue is not going to be market-moving.
Overnight US trading isn’t so great for Asian stock exchanges either. Many, including those in Korea, Japan and Hong Kong, have operated at home as virtual monopolies and benefit from the extra activity when local retail traders get excited. Now they face competitors who offer their customers access to the likes of Nvidia and Palantir.
Small investors do get something from these changes. Those in Asia get access to hot US stocks in their daytime while Americans get to trade outside normal working hours. Yet a paper this year from Ohio State University calculated the high costs of the thinner liquidity in the small hours: the gap between the midpoint of the buy and sell prices and the price actually traded was three times that found during the daytime. The impact of trades on subsequent prices was also roughly six times as large, potentially costing other traders money, too.
So far, brokers seem to be the clearest beneficiaries. Overnight volumes at the likes of Robinhood Markets and Interactive Brokers have roughly doubled year-on-year. But helping out the intermediaries and giving retail traders a bit more flexibility hardly seems to justify the effort. All-hours trading still seems like a solution in search of a problem.
jennifer.hughes@ft.com
